Combat cigarette smuggling in the context of increasing excise tax

Effective solutions needed to combat cigarette smuggling

Scene of the discussion. Photo: Q.H

On November 19, 2024, Vietnam Law Newspaper organized a seminar on "Increasing special consumption tax and combating cigarette smuggling – raised issues" to listen to opinions from National Assembly deputies, experts, managers from state agencies and associations on the correlation between tax increase and smuggled cigarettes, as well as to record proposals on the increase level and roadmap for increasing special consumption tax in accordance with the economic and social context to best support the goals set by the Government.

Cigarette smuggling is still complicated

The latest data from the General Department of Market Management, Ministry of Industry and Trade shows that despite many efforts by state agencies, the cigarette smuggling situation is still complicated.

In the first 10 months of 2024, there were 1,067 violations related to smuggled cigarettes, 800 cases were handled, of which 3 cases were transferred to the Investigation Police Agency. The total amount of administrative fines is more than 3.1 billion VND and the value of the violating goods is more than 5.6 billion VND.

The number of cigarette packs and equivalents handled includes 23,931 cigarette packs and 4,000 products of various types such as electronic cigarette devices and essential oils.

Regarding the issue of smuggling, according to Mr. Le Thien Thanh, Deputy Head of the Investigation Guidance Department, Department of Drug and Crime Prevention, Border Guard Command, in 2024, importing and smuggling of foreign cigarettes and tobacco materials of unknown origin into our country is a pressing issue in society, affecting the health of consumers, affecting the competitiveness of legal cigarette manufacturing enterprises, causing loss of state budget revenue.

In that context, according to Mr. Le Thien Thanh, it is necessary to have a roadmap and a policy to increase taxes reasonably and in line with reality, in which the Government's goal of limiting consumption should be proactively implemented in harmony.

"The tax increase roadmap should be extended so that the Border Guard and Market Surveillance agencies have more time to prepare plans and forces to effectively respond to the increase in smuggled cigarettes due to tax increases," Mr. Le Thien Thanh emphasized.

According to Mr. Thanh, it is also necessary to promptly amend Decree 98/2020/ND-CP to issue strict sanctions for the transportation, trading and use of smuggled cigarettes, strengthen the legal basis in the fight against smuggling, as well as create a healthy business environment for legal enterprises.

Effective solutions needed to combat cigarette smuggling after tax increase

Analyzing the relationship between tax increase and increase in smuggled cigarettes, Mr. Trang A Duong, a member of the National Assembly's Ethnic Council, said that looking back at 2016, Vietnam increased tax from 65% to 70% and also in this year, the number of smuggled cigarettes destroyed increased from 6.8 million packs in 2016 to nearly 7.5 million packs in 2017.

In 2019, when tax increased from 70% to 75%, the number of smuggled cigarettes destroyed increased from nearly 1.4 million packs in 2019 to more than 5.1 million packs in 2020 and to nearly 6.6 million packs in 2021.

Thousands of packs of smuggled cigarettes were seized by Dong Thap Customs and Police in October 2024.

“The tax increase is of course not the only cause of the increase in smuggled cigarettes. If the tax is increased in a suitable manner, it will reduce an important risk of increasing the illegal trade of tobacco products,” Mr. Duong shared.

“The tax increase options show that the increase is still high and the annual increase schedule can cause great challenges for the legal tobacco industry in adapting, transforming and stabilizing production, which can negatively impact workers’ employment and social security issues.

At the same time, to support effective tobacco smuggling prevention after the tax increase, the tax increase schedule should be extended, the frequency of tax increase should be 2 to 3 years/time so that Market Surveillance agencies have more time to plan and prepare forces to respond to the wave of smuggling that is expected to strongly flood into Vietnam after the tax increase,” Mr. Duong commented.

Meanwhile, Mr. Hoang Minh Hieu, Standing Member of the National Assembly's Law Committee, said that up to now, the tax increase needs to ensure a reasonable roadmap to support domestic tobacco enterprises to have time to adapt and stabilize production, thereby minimizing the negative impact on employment of workers in the entire value chain of the industry, ensuring social security; simultaneously, supporting the effective use of State capital for tobacco manufacturing enterprises with State investment capital.