ANTD.VN - The Vietnam Tax Consulting Association believes that it is necessary to consider the level of increase in special consumption tax on tobacco products and a reasonable increase roadmap to ensure the maintenance of production and business activities and jobs for workers...
Ministry of Finance wants to increase tobacco tax sharply
According to the Ministry of Finance, the special consumption tax (SCT) on cigarettes is currently at 75%. However, this tax rate only accounts for about 38.8% of the retail price, much lower than in regional countries such as Singapore (69%) and Thailand (70%).
To increase the effectiveness of tax policy, in the draft revised Law on Special Consumption Tax, the Ministry of Finance has proposed to increase the special consumption tax on tobacco products. Accordingly, tobacco products will be subject to a mixed tax, including the current tax rate of 75% plus an absolute tax.
The Ministry of Finance proposed two options: Option 1, maintain the tax rate of 75% and add an absolute tax. Specifically, from 2026, each pack of cigarettes will be subject to an additional VND2,000 in absolute tax. From 2027 to 2030, this tax will increase by VND2,000 each year, reaching VND10,000/pack in 2030.
As for option 2, the tax rate of 75% will remain the same, but from 2026, an absolute tax of VND5,000/bag will be applied. Each year after that, it will increase by VND1,000/bag, reaching VND10,000/bag by 2030.
The Ministry of Finance is leaning towards option 2 because it believes that increasing absolute tax from 2026 will create a clear change in reducing tobacco consumption.
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The Ministry of Finance wants to sharply increase taxes on tobacco products. |
The Ministry of Finance believes that increasing excise tax on tobacco products will increase prices, thereby encouraging consumers to reconsider their habits of using these products. In particular, when the price of tobacco increases, the number of consumers, especially low-income earners and young people, will gradually decrease, contributing to reducing dependence on this harmful product.
At the same time, additional revenue from the tax increase will be used to fund health education campaigns, raise public awareness of the harmful effects of tobacco as well as disease prevention and control programs.
Consider the growth path
Commenting on this proposal, the Vietnam Tax Consulting Association highly agrees to apply the mixed tax calculation method for tobacco products.
However, VTCA believes that it is necessary to consider the level of increase in absolute tax rates, increase in tax rates as well as a reasonable increase roadmap to ensure the maintenance of production and business activities, jobs of workers in the supply chain from farmers' raw material cultivation, manufacturing plants, and commercial businesses. In order to create conditions to stabilize the market, help businesses and consumers adapt to the gradual increase in taxes until 2030, avoiding shock due to rapid and sudden increases.
Regarding the two options proposed by the Ministry of Finance, VTCA believes that increasing the tax by 2,000 VND, especially increasing by 5,000 VND from the first year, will affect the tobacco industry. Particularly for low-priced tobacco products, calculating an additional absolute tax on each pack of cigarettes will cause many difficulties in maintaining production and business activities.
Along with that, according to the opinion of the Vietnam Tobacco Association, tobacco factories proposed that the absolute tax rate by 2030 be a maximum of 3,000 VND/pack. According to the health sector, it is necessary to increase taxes to minimize the harmful effects of tobacco.
According to VTCA, it is really difficult to unify viewpoints and ensure the interests of all. Therefore, the Association recommends that there should be a more thorough assessment of the impact on many aspects when increasing high tax rates, with a continuous annual roadmap.
Furthermore, increasing taxes will increase cigarette prices, while the control and management of smuggled goods are still complicated, consumers will switch to using smuggled cigarettes, smuggled electronic cigarettes, which are not quality controlled and dangerous to users.
In addition, VTCA also cited some countries such as Malaysia, where the Special Consumption Tax Law changed, increasing the special consumption tax on cigarettes dramatically, aiming to reduce the number of smokers and increase state budget revenue. However, the goal was not achieved because consumers switched to smoking smuggled cigarettes, domestic factories encountered difficulties, and special consumption tax collection decreased.
Specifically, in Malaysia, special consumption tax on tobacco products has been continuously increased, in 2015, special consumption tax increased by about 40%. In addition, from 2016-2018, sales tax on tobacco products increased by 2 times (5% to 10%).
What happened after 5 years of tax increase: retail cigarette prices in Malaysia increased by 25%, the amount of legal cigarettes decreased by 55%. Illegal cigarettes exploded, accounting for 65% of the market share in 2020. The three largest cigarette manufacturers closed factories in Malaysia; government revenue dropped after the excise tax increase. Meanwhile, the number of smokers did not decrease.
Besides, for tobacco farmers (in remote areas such as the Central Highlands, Lang Son, etc.), it takes time to switch to growing other crops.
From the above analysis and data, VTCA stated that at previous workshops, many opinions suggested considering and calculating the option of increasing absolute tax and spacing out the increase time. Instead of increasing every year, it should be increased every 2 years so that by 2030, the absolute tax on cigarettes will increase by about 5,000 VND/pack.
In case the proposal of the above opinion group is not accepted, the Vietnam Tax Consulting Association recommends choosing Option 1 of the Draft Law, from 2026, the tax will increase by 2,000 VND/bag each year and by 2030, the total increase will be 10,000 VND/bag.
Source: https://www.anninhthudo.vn/de-xuat-can-nhac-lo-trinh-tang-thue-thuoc-la-de-tranh-soc-post605144.antd
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