At the seminar on Increasing special consumption tax and combating cigarette smuggling – issues raised, on the afternoon of November 19, Mr. Le Dai Hai, Deputy Director of the Department of Civil and Economic Law (Ministry of Justice), said that the Draft Law on Special Consumption Tax (amended) drafted by the Ministry of Finance is expected to be submitted to the National Assembly at the end of this month. If approved, it will take effect in 2026. Accordingly, the Ministry of Finance proposed two options for increasing cigarette taxes.
Option 1 : In 2026, the tax rate remains at 75% and an additional 2,000 VND/bag is added. From 2027 to 2030, the tax will increase by 2,000 VND/bag each year. By 2030, the absolute tax rate will be 10,000 VND/bag.
Option 2 : In 2026, when the revised Law on Special Consumption Tax officially takes effect, along with maintaining the current tax rate of 75% on the selling price, the absolute tax on cigarettes is 5,000 VND/pack. Each year after that, it will increase by 1,000 VND/pack. By 2030, the tax will increase to 10,000 VND/pack.
“The Government will submit the above two options to the National Assembly at the next session,” said Mr. Hai, adding that after submitting, it will absorb opinions to edit and complete the draft.
Excise tax (SCT) is an economic tool designed to tax luxury goods, products that are harmful to health, the environment, or have properties that require limited consumption. Tobacco is harmful to people’s health, so most countries in the world apply special consumption tax on this item. According to data from the World Health Organization (WHO), out of 178 countries surveyed, 13 countries (accounting for 7%) do not impose special consumption tax on tobacco.
In Vietnam, tobacco is one of the items subject to special consumption tax, with the current tax rate being 75% of the factory price. After nearly 34 years, the special consumption tax rate on tobacco was adjusted from 50% to 75%. Of which, the tax rate was reduced twice in 1988 by 5% (from 70% to 65%) and in 2006 by 10% (from 65% to 55%), from 2008 to present, it has increased according to the roadmap.
Ms. Nguyen Thi Cuc, President of the Vietnam Tax Consulting Association, said that continuing to increase the special consumption tax on cigarettes is necessary. The smoking rate among men decreased from 45% in 2015 to nearly 39% in 2023. However, Vietnam is still among the countries with the highest smoking rate in the world, with more than 15 million people using cigarettes. Therefore, increasing the special consumption tax on cigarettes will make the selling price more expensive, thereby contributing to regulating and reducing consumption, while minimizing serious diseases, especially respiratory diseases and lung cancer.
However, Ms. Cuc said that tax increases need to be harmonious, with a suitable tax adjustment roadmap to achieve the same goals of regulating the state budget, stabilizing production and business, aiming at public health, and combating smuggling. “The increase in special consumption tax will directly impact legal cigarettes while illegal cigarettes are not affected, leading to a decrease in legal production and creating favorable conditions for illegal cigarettes to enter,” she said, citing Malaysia as an example, where consecutive tax increases caused smokers to switch from consuming legal products to illegal cigarettes at extremely low prices. At that time, this country ranked first in the world in illegal cigarettes, accounting for about 65% of the total market in 2020.
In Vietnam, data released by the General Department of Market Management, Ministry of Industry and Trade shows that the situation of cigarette smuggling is worrying. In the first 10 months of this year, the whole industry discovered 1,067 violations related to smuggled cigarettes, of which 800 cases were handled, 3 cases were transferred to the Police Investigation Agency.
On the business side, Mr. Ho Le Nghia, Chairman of the Vietnam Tobacco Association, said that he agreed with the need to increase taxes, but the absolute excise tax with such a sudden increase caused difficulties for tobacco businesses. The tobacco industry contributed about 26,000 billion VND to the state budget in 2023, creating about 1.1 million direct and indirect jobs. Therefore, he recommended that there should be a roadmap and appropriate tax increase intervals for businesses to adapt, transform and stabilize production, create jobs for workers and social security issues. Accordingly, he proposed applying a mixed method with a gradual increase roadmap: 2,000 VND in 2026, 2,000 VND in 2028 and an additional 2,000 VND in 2030, to minimize negative impacts on the industry and the market.
Source: vnexpress.net (Le Nga)
Source: Vietnam Insider