Tobacco and aircon units lead excise tax discussions, photo Le Toan

In the latest draft law from the ministry (MoF) submitted late last month, the tax rate of 75 per cent on tobacco will be maintained, with an absolute tax rate added according to a roadmap increasing annually from 2026 to 2030.

A representative of the Ministry of Health also supported maintaining the 75 per cent tax rate and adding an absolute tax on tobacco products as proposed by the MoF to quickly reduce smoking rates and increase the tax rate on retail prices.

“In Vietnam, tobacco products cause 40,000 deaths each year, and medical costs related to tobacco-related diseases amount to $1 billion,” he said at a meeting on August 2.

Nguyen Nhu Quynh, director of the MoF’s Institute of Strategy and Financial Policy, noted that Vietnam is among the 15 countries with the highest number of smokers in the world, with about 15.3 million smokers and 33 million people affected by passive smoking. Approximately 40,000 people die each year from tobacco-related diseases in Vietnam.

“These numbers highlight the alarming harm tobacco poses to public health and society. Therefore, preventing the harmful effects of tobacco is no longer just the work of individuals or families but a responsibility for the whole society and country, aligning with a global effort,” Quynh said.

He cited that despite various measures and action programmes, including increasing the special consumption tax (SCT) rate in 2016 and 2019, results have been modest. The rate of tobacco users in Vietnam has decreased, but by small amounts: from 47.4 per cent of men smoking in 2010 to 45.3 per cent in 2015, and about 42.7 per cent in 2022.

The World Health Organization has suggested that cigarette prices in Vietnam are generally low, ranking 157th out of 161 countries. Under current law, the SCT rate on cigarettes in Vietnam is 75 per cent of the manufacturer’s selling price. However, the total consumption tax only accounts for about 38-39 per cent of the retail price of cigarettes in Vietnam today, much lower than the average of middle-income countries (59 per cent) and most ASEAN countries (about 60-70 per cent).

Dr. Nguyen Tuan Lam, a WTO representative, said that Vietnam has taken many positive measures to combat the harmful effects of tobacco but will struggle to hit the target of reducing the smoking rate by 30 per cent by 2030.

“One of the biggest challenges is that the price of cigarettes is very cheap in Vietnam. Incomes have increased but the price of a pack of cigarettes has remained almost the same. Therefore, experts say that this is something Vietnam needs to change. Increasing tobacco taxes is the fastest and most effective way to achieve the set goal,” Lam said.

The Vietnam Chamber of Commerce and Industry (VCCI) pointed out that air conditioners have been subject to SCT since 1998 at 20 per cent, which was reduced to 10 per cent in 2008. In the past, air conditioners were considered a luxury item. However, they have now become an essential need on a daily basis, at work and at home.

Furthermore, the VCCI’s proposal stated, “Many studies have shown that maintaining a suitable room temperature is very effective in improving labour productivity. This is especially meaningful for Vietnam as we aim to develop a knowledge-based economy. Therefore, we request that the drafting agency consider removing the SCT on air conditioners.”