Propose to increase special consumption tax to limit smoking

The low price makes Vietnamese adolescences buy the harmful commodity easily.

The roadmap for increasing the special consumption tax rate on cigarettes in the Law Amendment of the Law on Special Consumption Tax No. 70/2014/QH13 dated by January 1, 2016, from 65% to 70%; by January 1, 2019, from 70% to 75%.

The Ministry of Finance analyzes, according to the World Health Organization (WHO), tobacco is one of the leading causes of morbidity and mortality in the world. Using tobacco causes 25 different diseases, such as: lung cancer, larynx cancer, oral cancer, skin cancer, cardiovascular diseases...

Vietnam is among the 15 countries having the highest number of smokers in the world. The high rate of smokers in Vietnam has many causes, including the low retail price of cigarettes that makes the adolescences buy tobacco easily. Currently, Vietnam has a tax on cigarette retail price of 48.1% (calculated the tariff rate in 2019 is 75%), much lower than other countries in the region (Brunei’s 81%, Thailand’s 70%, Singapore’s 69%, Malaysia’s 57%, Indonesia’s 51%, Myanmar’s 50%) and developed countries (Australia’s 62%, Germany’s 75%, France’s 80%).

In addition, along with many other countries, Vietnam has signed and joined the Framework Convention on Tobacco Control (FCTC) since January 1, 2005. In Article 6, the Framework Convention on price and tax measures to reduce tobacco demand states clearly: Price and tax measures are important and effective measures to reduce tobacco consumption in the people classes, especially the adolescences.

The Law on prevention and control of tobacco harms also regulates the applications of appropriate tax policies to reduce the rate of tobacco use.

Thus, in order to restrict the adolescences to access to cigarettes and contribute to the public health protection, the Ministry of Finance has proposed two options to for the special consumption tax adjustment. The first, applying the collection of special consumption tax rate by a mixed method (combined with tax rates and absolute tax).

Accordingly, the absolute tax rate of 1,000 dong/cigarette pack of 20 and 1.500 dongs/cigar is added. This regulation is effective from January 1,2020. The second, increasing the tax rate under the road map. From January 1, 2020, it increases from 75% to 80%; From January 1, 2021, it increases from 80% to 85%.

As submitting to the Government, the Ministry of Finance is in favor of the first solution.

Explaining, Mr. Pham Dinh Thi, Director of the Department of Tax Policy, under Ministry of Finance said: According to the experience of countries in the world, there are 3 methods of special consumption tax collection for cigarettes: absolute revenue; percentage and combined rates of absolute and tax rates in percentages.

Meanwhile, the first measure has been applied in many developed countries (48 countries). In the ASEAN region, several countries have been applied the method such as Laos with the tax rate of 15-30%/ factory price and plus 500 Lao kips or $US 0.07/ cigarette pack; Malaysia has applied the absolute tax of 0.19 Malaysian Ringgit/cigarette and 20% of the factory price; Thailand has applied the tax rate of 87% of the factory price and 1 bath or $US 0.03. gram. China also applies the mixed taxes method for several types of cigarettes (for Group A, the tax rate is 45% and plus 0.003 yuan for a cigarette).

Answering the question about whether the absolute revenue of VND1,000 / cigarette pack is low, Mr. Thi said that this is a matter for calculation because it will affect production. Each year, Vietnam produces about 5 billion cigarette packs and consumes about 4 billion packs. Therefore, if we collect 1,000 VND more per pack, the budget will be added 4 trillion VND, this figure is not small.

The proposal of the Ministry of Finance is being drafted on the Draft Law on amending and supplementing the Law on Value Added Tax, the Law on Special Consumption Tax, the Law on Corporate Income Tax, the Law on Personal Income Tax and the Law on Natural Resource Tax to submit to the Government to submit to the National Assembly to put into the law development program in next year.