Vietnam’s tobacco tax hike proposal would strain manufacturers and boost black market sales, according to critics.
The Ministry of Finance wants to levy a new fixed tax on cigarettes on top of the existing excise tax as the government seeks to discourage smoking. While the excise accounts for 75 percent of factory prices, it is only 38.8 percent of retail prices—far below the 70 percent recommended by the World Health Organization, according to the ministry.
Nguyen Chi Nhan, general secretary of the Viet Nam Tobacco Association, warned that businesses would struggle to adapt to the sharp tax increase.
Dinh Thị Quynh Van, chairwoman of PricewaterhouseCoopers in Vietnam, pointed out that cheap cigarettes account for 75 percent of the domestic market. A sudden and sharp tax hike, she said, could spur smuggling.
Van said this happened in countries such as Britain, Germany and Malaysia.
“It is important for the ministry to have solutions to prevent tobacco smuggling and a clear tax increase roadmap,” Van told Vietnamnet Global.
Nguyen Thi Cuc, chairwoman of the Vietnam Tax Consultants’ Association, suggested the ministry increase the tax level more gradually to give customers and businesses time to adapt.
Vietnam is among the top 15 countries in terms of number of smokers.