Experts propose tax increase on cigarettes to cut smoking

Increasing taxes on tobacco is considered the best option to reduce the number of smokers

Scientists, medical experts and policy makers gathered at an international seminar, held in Hanoi on September 25 by the Ministry of Information and Communications in collaboration with the HealthBridge Foundation of Canada, to discuss measures to promote tobacco harm reduction, focusing on solutions to raise taxes against cigarettes.

At the event, experts recommended that in order to achieve the national goal of reducing the number of smokers, as well as reducing the economic and health burdens of tobacco use and increasing State revenues, the current cigarette tax should be reformed in the direction of supplementing an absolute tariff in addition to current tax rates.

Vietnam has a high rate of tobacco consumption, ranking third in the ASEAN and 9th in the world in terms of the number of smokers. Vietnam has been suffering a huge economic burden due to the use of tobacco. In 2015, the total amount of cigarettes consumed by Vietnamese people was worth VND31 trillion (US$1.3 billion), according to the Global Adult Tobacco Survey 2015 by the World Health Organisation (WHO).

In addition, VND24 trillion (equivalent to nearly 1% of 2011 GDP) is the total cost for treatment and work-related disability due to morbidity and mortality of five groups of tobacco-induced diseases, including lung cancer, upper respiratory tract cancer, chronic obstructive pulmonary disease, stroke and myocardial infarction.

Increasing excise taxes to raise tobacco prices is an effective solution, in order to reduce the affordability of tobacco and prevent tobacco-related illnesses and deaths. According to the WHO and the World Bank, raising taxes at a rate that could increase the real price of cigarettes by up to 10% will reduce tobacco consumption by 5% in developing countries, and reduce tobacco consumption by up to 10% in children and the poor.

According to the National Strategy on Tobacco Harm Prevention and Control by 2020, the rate of tobacco use among men should be reduced to 39% by 2020, equivalent to a decrease of 6.3% compared to 2015.

Experts at the event discuss measures to reduce the prevalence of tobacco related disease, focusing on solutions to raise taxes on cigarettes

The Draft Law on Amendment to a Number of Articles under the Law on Value Added Tax, the Law on Excise Tax, the Law on Corporate Income Tax and the Law on Personal Income Tax, which was made public for comments since September 2017, proposed applying a combined excise tax, in addition to the current tariff, from January 1, 2020, supplementing an absolute tax at VND1,000/pack of 20 cigarettes and VND15,000/cigar.

Nguyen Thi Thu Huong, from the Tobacco Harm Prevention and Control Fund, Ministry of Health, said that her ministry supports the proposal to increase the excise tax on cigarettes with the Ministry of Finance's proposal for additional absolute tax. According to Huong, absolute taxation has a greater impact on selling prices, thus avoiding transfer pricing by producers, reducing the price gaps between tobacco lines and reducing super cheap tobacco products.

The proposal would also has a more positive impact on the public health sector, contributing to further reduce the rate of smoking and increase the effectiveness of tobacco use prevention among adolescents and low-income people.

Huong also argued that with the plan only supplementing the absolute rate at VND1,000/pack as proposed by the current law, as calculated from WHO economic experts and her fund, the State revenue will increase by nearly VND4 trillion by 2020. However, the proportion of adult male smokers will only decrease by 1.5% by 2020, which is very low compared to the target of 6.3% set by the government. Therefore, this tax is far from achieving the goal of the National Strategy on Tobacco Harm Prevention and Control by 2020.

If doubling the proposed absolute tax to VND2,000/packet, smoking rates for men may fall by 3%, plus an additional 3% reduction in tobacco use due to other tobacco harm reduction measures, thus helping achieve the national goal, she stated. In addition, tax collection from tobacco sales will increase by VND6.3 trillion per year. The greater benefit is the avoidance of 300,000 premature deaths caused by tobacco. This is a highly valued option, contributing to the protection of public health, Huong suggested./.

NDO