The Vietnamese Ministry of Finance has proposed slapping a steeper excise duty on cigarettes and adding an absolute rate per pack, according to a draft revising the Law on Excise Tax.

The current excise duty on tobacco in Vietnam is 75 percent of the factory price.

However, the World Health Organization has assessed that this tax constitutes only 38.8 percent of the retail price, which is much lower compared to Singapore at 69 percent and Thailand at 70 percent.

Meanwhile, the rate of adult smokers is high, at over 42 percent.

To address this issue and protect public health, the ministry has proposed two solutions to increase the excise tax on tobacco, aiming to reduce cigarette consumption.

The first solution includes the 75-percent excise tax kept unchanged in 2026, and an additional tax of VND2,000 (US$0.07) a pack.

From 2027 to 2030, the tax will be revised up by VND2,000 per pack each year. The absolute rate will stand at VND10,000 ($0.4) per pack of cigarettes in 2030. 

As for the second solution, the ministry said that when the amended Law on Excise Tax takes effect in 2026, the 75-percent tax is kept unchanged, plus the unhealthy product is subject to an absolute rate of VND5,000 ($0.19) per pack.

However, the tax will increase by VND1,000 ($0.03) per pack each year in the following years. In 2030, the duty will soar to VND10,000 per pack.

To cut cigarette consumption effectively, the ministry prefers the second solution.

Nguyen Nhu Quynh, head of the National Institute for Finance, said that Vietnam is among 15 countries in the world with the highest smoking prevalence.

Vietnam sees some 15.3 million adults smoking, while 33 million people nationwide are impacted by smoke.

Nearly 40,000 people die from tobacco-related diseases each year.

Speaking at a recent conference in Hanoi on excise tax on tobacco, Nguyen Chi Nhan, general secretary of the Vietnam Tobacco Association, stated that the two solutions proposed by the Ministry of Finance might come unexpectedly to firms.

He noted that the change would negatively affect the tobacco industry.

Therefore, Nhan proposed raising the excise tax on tobacco by VND1,000 a pack in 2026. From 2027 to 2030, the tax will climb by VND500 ($0.01) a pack each year. The increased level will stand at VND3,000 ($0.11) a pack in 2030.

Dinh Thi Quynh Van, chairwoman of PwC Vietnam, noted that legal low-cost tobacco holds 75 percent of the market share.

She warned that imposing a steeper excise tax on tobacco could lead to a surge in cigarette smuggling.

Van advised that the ministry should carefully consider the tax increase and implement it with an appropriate roadmap.

Apart from pushing up the tax, local authorities and police should adopt drastic measures to prevent tobacco trafficking, she added.

Agreeing with this perspective, Nguyen Thi Cuc, chairwoman of the Vietnam Tax Consultants' Association, recommended that the ministry carefully develop a roadmap for hiking the excise duty on cigarettes.

The hike should balance the benefits to public health, the production and business activities of firms, and the state budget, Cuc said.

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