Experts urge Vietnam to aim higher with tobacco tax

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A man smokes under a "no smoking" sign at the Ho Chi Minh City Children's Hospital No. 2. Photo: Nguyen Mi A man smokes under a "no smoking" sign at the Ho Chi Minh City Children's Hospital No. 2. Photo: Nguyen Mi

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Experts say Vietnam should raise its tax on tobacco beyond the Ministry of Finance's modest plan in order to curb smoking and raise much-needed funds.
Pham Thi Hoang Anh, director of the NGO HealthBridge Vietnam, said the special consumption tax on tobacco in Vietnam has been maintained at 65 percent since 2008.
The ministry plan would raise it by 75 percent in 2015 and 85 percent in 2018.
“The managing agencies can increase the price of gasoline and electricity at any time even though these are essential products for production and daily life. But increasing the tax on tobacco has been too difficult,” she said at a conference on the issue in Hanoi on September 13. 
“Vietnam has a golden chance to increase its tobacco tax. If this chance is missed for two or three years, it will seriously affect the young people."
Nguyen Tuan Lam of WHO Vietnam said lawmakers should raise the tobacco tax by 105 percent in 2015 and 145 percent in 2018 to achieve its national target of reducing smoking from 47.4 percent to 39 percent of the male population.
According to the WHO, smoking falls by five percent when tobacco prices go up by 10 percent due to tax increase.
Phan Thi Hai, spokeswoman for Vietnam's Steering Committee on Smoking and Health, said smoking has caused significant damage to the economy.
Vietnamese smokers spent VND45 trillion (US$2.12 billion) on tobacco and the treatment for related diseases in 2012 -- that's triple the revenue Vietnam took in from tobacco sales that same year.
At the conference, experts said a minor tax increase won't have the expected effect due to increasing per capita incomes.
Under the increases proposed by the finance ministry in the draft amendments to the Law on Special Consumption Tax, increasing tobacco taxes to 75 and 85 percent in 2015 and 2018 respectively will increase state revenue on tobacco by VND2.9 trillion (some $137 million) in 2016 and VND7.7 trillion (nearly $364 million) in 2018.
With higher increases proposed by the experts, revenues would rise by VND9 trillion ($425 million) in 2016 and VND24 trillion ($1.14 billion) in 2018.
Meanwhile, under the finance ministry plan, retail cigarette prices are expected to increase 2.9 percent in 2016 and 2.8 percent in 2019, while per capita income increases by 4.8 percent annually.
“To reduce sales and smoking, tax increases have to outpace per capita income gains,” Hai said.
 

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