1. VIETNAM TOBACCO TAX REFORM
April 2017
Tax Policy Dept., Ministry of Finance of Vietnam

2. OUTLINE OF PRESENTATION
Background & Tobacco tax strategy
Tobacco tax recent changes and related issues
Future reform

3. 1. BACKGROUND Population: > 90 millions
Smoking prevalence (2015): 45.3%
Government Tobacco Control Strategy by 2020:
Reduce prevalence from 47.4% in 2011 to 39% by 2020
Establish TC Fund to carry out TC activities
Govt Tax Reform Strategy by 2020, including tobacco
To work out a roadmap for adjusting tax rates applicable to cigarettes to regulate consumption and implement international commitments;
To study to apply ad valorem and specific rates

4. 2. Tobacco tax and price measure
All tax rates are ad-valorem
- Tariff/Import tax: 135%
- VAT: 10%
Excise: 70%
Minimum price on cheap brands

5. Tobacco Control Fund (TC Fund)
TC Fund established from May 2013 Compulsory contribution to TC Fund = Compulsory rate (%) x excise taxable price. From May 2013 – May 2016: Compulsory rate is1%. From May 2016: Increased to 1,5%; From May 2019: Increased to 2%.

6. 2.1. Amended Excise Tax in 2014
Before 2016 (From Apr 01, 2009): 65% From 2016, Amended Excise Tax law provided for tobacco tax increase roadmap:
Goods/ rate
2014
2015
2016
2017
2018
2019
cigarettes
65%
70%
75%

7. 2.2. Amended Excise Tax Law recently (cont)
Change in taxable price since 01/01/2016:
For imported goods: swifting from CIF price to selling price of importers
At import stage: temporary taxing at import price but still subject to their selling price at later stage
When importer sell imported goods: taxing the margin (selling price – import price)

8. 2.3. Arguments on recent changes
To increase tax rate:
To reduce consumption
To reduce health cost and death
To realize the Govt TC and Tax Reform Strategy
To taxable price on imported goods
- Ensure equal treatment between domestic and imported cigarettes

9. 3. Issues
Industry strong intervention against proposed tax rate increase and roadmap.
Industry rationales
+ illicit trade
+ reduction in revenue
+ heavy tax burden & contribution to TC Fund established from 2013
+ job loss, affect poor people
State owned tobacco enterprises

10. 4. Future excise tax reform
Context:
Continue to complete Tax Reform Strategy period
Need to review implementation of recent tax changes
Still need to increase tobacco tax
Govt working out roadmap to equitize Stated owned tobacco enterprises

11. 4. Future excise tax reform
Steps: - MOF preparing to propose to Government to revise Excise tax law - Continue to complete Tax Reform Strategy period Work out Excise Tax Reform Strategy period incorporate tobacco tax increase:

12. 4.Tobacco tax reform preparation & support
For ad-hoc /urgent proposal:
For normal track legislation agenda
Impacts Assessment Report (Revenue, Illicit, Job, ...)
New proposal
Submission Paper
Advocacy to all related levels

13. 4.Tobacco tax reform preparation & support
Preparation: usually 3 years in advance or instant support for ad-hoc /urgent proposal
Technical support:
WB, WHO
BI (Union, TFK...),
HealthBridge,
SEATCA
...

14. THANK YOU