Increase excise tax on cigarettes: Which option is the best?
The Conference |
Recently, the Vietnam Tax Consultants Association (VTCA) and Vietnam Chamber of Commerce and Industry (VCCI) jointly organized a conference on "Excise Tax - Harmonizing State budget revenue regulation and development of production and business" in Hanoi to contribute to realizing the objectives stated in the Prime Minister's Decision 508/QD-TTg issued in April 2022, which requires research and application of between the tax rate by ratio and the flat tax rate when developing a roadmap for a tax increase for tobacco products.
Harmonizing interests of the State, people and businesses
At the seminar, VCCI Deputy Secretary General Dau Anh Tuan said that excise tax has contributed to orienting the production and consumption of society; regulating consumer income; and increasing revenue for the state budget. However, in addition to the achieved results, the business community expects that excise tax needs to meet higher requirements such as ensuring a stable, favorable business environment and harmonizing the interests of the State, people and businesses.
According to Mr. Dau Anh Tuan, a good excise tax, in addition to orienting consumption behavior and increasing budget revenue, must take into account the following factors: feasibility, compliance, fair competition, reliability, predictability and consistency with international practices.
According to Ms. Nguyen Thi Cuc, Chairwoman of VTCA, excise tax increase to limit cigarette consumption is necessary. Besides a reasonable tax policy, other measures should also be implemented in a synchronous manner such as information to all classes of people about the harmful effects of cigarettes; control of smuggled cigarettes; strictly implementing fines on the act of smoking in public places.
Ms. Nguyen Thi Cuc also said the tax increase on tobacco products should have a roadmap so that production and business enterprises can adjust and arrange their operation, both stabilizing production plans, contributing revenue and limiting smuggled cigarettes, avoiding tax revenue loss, and protecting public health.
“We propose a plan to amend according to the roadmap as follows: in the first two years, we will apply the mixed tax method - relative and absolute, in addition to the 75% tax rate, the flat rate can be increased from VND1,000/pack. In the next two years, the flat tax rate can be increased from VND1,000/pack to VND1,500/pack. From the 5th year, it will be increased by VND2,000/pack,” said Ms. Nguyen Thi Cuc.
Le Thi Thuy Van, Deputy Director of the Institute of Financial Strategy and Policy (Ministry of Finance), said that the method of applying excise tax on cigarettes in the world is quite diverse (by percentage, flat or mixed rate), however, Vietnam has only applied the method of applying excise tax on cigarettes according to percentage. This method is revealing many shortcomings such as failing to keep pace with the inflation rate, encouraging the increase of cheap cigarettes available in the market, thereby increasing the accessibility and smoking for teenagers and increasing rates of secondhand smoke among children.
Meanwhile, the method of mixed tax is popular in many countries due to its benefits, but it is recommended that the excise tax by the mixed method should have a roadmap to ensure that the flat tax amount increasing over the years needs to correspond to the inflation rate.
Citing data from the World Health Organization, Ms. Dinh Thi Quynh Van, General Director of PwC Vietnam Auditing and Consulting Company, said that among the three methods, the number of countries choosing the flat tax method is the highest (66 countries), followed by the mixed tax method (61 countries) and percentage tax (47 countries). Compared with nearly 15 years ago (2008), the mixed tax method rose in the number of countries.
Tax increase and anti-smuggling problem
According to Chairman of the Vietnam Tobacco Association Ho Le Nghia, the increase of excise tax, if any, should consider the harmony between State budget revenue and the development of production and business. The Association recommended that law enforcement agencies should develop an appropriate roadmap and level of excise tax increase for tobacco products due to the fact that the Vietnamese market has many different price segments, avoiding creating opportunities for smuggled cigarettes, leading to tax revenue loss.
The Chairman of the Vietnam Tobacco Association said that instead of accelerating the increase of taxes and imposing new fees on legal tobacco products, we should focus on effectively combating smuggled cigarettes.
Mr. Ho Le Nghia said that smuggled cigarettes are currently a serious problem in the cigarette market in Vietnam. The Vietnam Tobacco Association has supported and closely worked with anti-smuggling agencies from the central to local levels to promote the prevention of contraband cigarettes.
“The association proposes to the State and relevant agencies to apply stronger and more drastic measures and use part of the funds from the Tobacco Harm Prevention Fund to accelerate the fight against smuggled cigarettes, thereby increasing the budget revenue from the legal tobacco industry, instead of accelerating tax increases and imposing new fees on legal tobacco products," Nghia said.
According to Dr. Nguyen Dinh Cung, former Director of the Central Institute for Economic Management, a tax increase is a tool, but a tax rise may boost smuggling which will reduce legal production and consumption, thereby reducing tax revenue. In addition, the spiral of tax increase - price increases may push smokers to switch to cheap products that affect health. Tax policies should also regulate consumption behavior, helping users gradually switch to less harmful products thanks to technological reforms, less harmful cigarettes or minimizing negative impacts on the general environment and non-smokers.
Continuing to review to adjust excise tax and VAT on gasoline VCN - The Ministry of Finance will continue reviewing adjustments to the excise tax and value added ... |
Mr. Young Jae Song - General Director of British American Tobacco (BAT) - Vinataba Joint Venture Company, also suggested that excise tax increase should not be conducted in the next one to two years, and the State should consider a reasonable roadmap with an appropriate increase level to avoid the rocket, causing market instability, affecting business environment and increasing illicit cigarettes as well as social security problems.
Related News
Ho Chi Minh City Customs and Border Guard join hands to prevent dozens of smuggling cases
10:27 | 18/10/2024 Anti-Smuggling
Criminals take advantage of establishing enterprises to illegally produce and transport drugs
10:14 | 08/10/2024 Anti-Smuggling
Combat smuggling in sea areas of Hai Phong and Thai Binh
08:56 | 25/09/2024 Anti-Smuggling
Drug transportation across border gates becomes increasingly sophisticated
09:06 | 22/09/2024 Anti-Smuggling
Latest News
"One law amending four laws" on investment to decentralize and ease business challenges
16:44 | 01/11/2024 Regulations
One law amending seven financial laws: New driving force for economic growth
16:34 | 01/11/2024 Regulations
Ensure harmony of interests of “3 parties” when applying 5% VAT on fertilizers
08:54 | 30/10/2024 Regulations
Tax, fee, and land rent exemption, reduction, and deferral policies: a driving force for business recovery and growth
11:34 | 27/10/2024 Regulations
More News
Revamping commodity management and trade protection
11:26 | 26/10/2024 Regulations
Tax support policy is a "lift" for business bounceback
14:52 | 24/10/2024 Regulations
VAT policy for on-the-spot imports
13:44 | 23/10/2024 Regulations
Applying tax on animal feed ingredient faces problems due to specialized regulations
10:17 | 21/10/2024 Regulations
Ministry of Finance proposes to choose the option of reducing land rent by 30% in 2024
15:29 | 20/10/2024 Regulations
Ensuring reasonableness upon enforcement of regulations in "1 law amending 7 laws"
00:00 | 19/10/2024 Regulations
Ensuring global trade security requires cooperation, exchange and processing of information before the goods arrive
10:29 | 18/10/2024 Regulations
New regulations on foreign indirect investment in Vietnam drafted
13:46 | 15/10/2024 Regulations
Considering amending regulations on suspension from exit due to tax arrears
09:30 | 15/10/2024 Regulations
Your care
"One law amending four laws" on investment to decentralize and ease business challenges
16:44 | 01/11/2024 Regulations
One law amending seven financial laws: New driving force for economic growth
16:34 | 01/11/2024 Regulations
Ensure harmony of interests of “3 parties” when applying 5% VAT on fertilizers
08:54 | 30/10/2024 Regulations
Tax, fee, and land rent exemption, reduction, and deferral policies: a driving force for business recovery and growth
11:34 | 27/10/2024 Regulations
Revamping commodity management and trade protection
11:26 | 26/10/2024 Regulations