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Tax increase an optimum tobacco control measure

guy-and-girl-smokingFirst published: March 13, 2010

Source: Thanh Nien News

The country’s population has been increasing at 1.5 percent per year and a large proportion of the population will belong to the highly smoking-susceptible age group of between 25 and 55 in the next 15 years, according to the World Health Organization’s Vietnam Country Office (WHO Vietnam).

“Nearly half of Vietnamese men smoke and the rate is even higher, at 65 percent, among men between 25-45 years old,” said Nguyen Tuan Lam, National Professional Officer of WHO Vietnam’s Tobacco Free Initiative.

Around 40,000 people in Vietnam die every year to tobacco-related diseases and the low price of cigarettes and water-pipe was among the causes of the high smoking rate among men, he said.

“The most effective measure to reduce smoking in Vietnam is increasing tobacco prices through taxation,” he said.

In a report titled “Questions and Answers on Tobacco Taxation in Vietnam” released on March 9, WHO Vietnam said there are no harmful consequences of a tobacco tax increase.

It is unlikely that many people will change to cheaper brands or water-pipe tobacco because the cigarette is largely a brand-loyalty product and substitution happens mostly when the price becomes prohibitively costly, the United Nations agency said.

At the moment the prices of cigarettes are cheap compared to the increased income and have become more and more affordable. Meanwhile, there is also a clear trend of people switching from water-pipe to cigarettes in recent years, the WHO said.

An increase in tobacco taxes could also influence more poor people to give up smoking because their demand is more price sensitive than that of the rich.

The move is also unlikely to affect tobacco farmers in the short and medium term as Vietnam imports about one third of tobacco leaves.

The WHO said an increase in the tobacco tax would not result in a rise in smuggling because tobacco smuggling was determined by many factors including differences in price, the taste of smokers for smuggled cigarettes, acceptance by the public of smuggled products, the strength and effectiveness of anti-smuggling actions, level of transparency and corruption in a country and the level of control on the retailers’ network.

The tax increase would bring in more revenues for the government and is also good for public health. “It is a win-win policy,” the agency said.

With a tax increase of 20 percent, retail prices would increase by about 10 percent and government tax revenues will go up by VND1.9 trillion (US$101.7 million), the WHO estimates.

Statistics show tobacco taxes increased to 65 percent of factory prices in 2008 over 55 percent in 2007. This led to a 4 percent reduction in production but tax revenues increased by 19 percent.

Bungon Ritthiphakdee, director of the Southeast Asia Tobacco Control Alliance (SEATCA), said taxation was the most effective tobacco control measure.

A tobacco tax, as percentage of retail price, ranges between 15 percent and 70 percent among ASEAN countries and an ideal rate is above 65 percent, according to the WHO report. Vietnam’s tobacco tax is around 45 percent of retail prices, while Thailand tops the list at 70 percent followed by Singapore with 69 percent.

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