Nguyen Thi Cuc, chairwoman of the Vietnam Tax Consultants Association speaks at a conference held in Hanoi to discuss increasing tax on tobacco products. (Photo: VNS)Theconference, jointly organised recently by the Vietnam Tax ConsultantsAssociation (VTCA) and Vietnam Chamber of Commerce and Industry (VCCI), soughtto gather opinions from experts and entrepreneurs for fulfilling targets in theGovernment’s Decision 508/QD-TTg issued in April, 2022 on tax reforms from nowthrough 2030.
Theconference heard there are three kinds of tax regimes for tobacco globally: thead valorem tax structure by a percentage on the taxable price (factory orretail price) of products; the specific tax structure (i.e. a fixed tax amountper unit of goods); and the mixed tax structure (i.e. a combination of the advalorem tax by percentage and the specific tax).
Thespecific tax is the most popular of the three with 66 countries adopting it,followed by the mixed tax (61 countries) and ad valorem tax (47).
“Ad valorem excise has many limitations,” Le Thi Thuy Van, deputydirector of the Ministry of Finance’s Institute for Financial Strategy andPolicy, said, pointing out that this approach has not kept pace with inflationand encouraged the proliferation of low-cost cigarettes on the market.
ForVietnam, which uses ad valorem, she recommended the mixed tax structure.
“Thetax increase under the mixed tax structure needs a road map to ensure that overthe years it corresponds to inflation.”
Dinh Thi Quynh Van, general director of PwC Vietnam, said the advalorem tax does not promote investment in production or help improve productquality due to the higher costs of production.
Thisleads to higher selling prices, and enterprises have to bear a greater taxburden due to the multiplier effects of the ad valorem structure, she said,suggesting that it is necessary to reform the tax structure in the direction ofencouraging quality improvement to reduce the adverse effects on health byswitching to a mixed tax system and using the specific tax to regulate theconsumption market in a proper way.
Speakingabout the time frame, experts agreed that a proper road map is needed to ensuregovernment revenues will not be affected, producers will get enough time tostabilise their operations and tobacco smuggling will be prevented.
NguyenThi Cuc, chairwoman of the VTCA, told the conference that the tax increase ontobacco products should follow a proper road map so that enterprises couldadjust their operations and production would not suffer.
Asuitable road map will also help with smooth collection of government revenues,prevent revenue losses and limit smuggling of cigarettes and at the same time contributeto the protection of public health, she said.
Young Jae Song, general director of the BAT -Vinataba Joint Venture Company, concurred with the adoption of the mixed taxmethod.
Butthe Government should not increase the excise tax in the next one or two years,he said.
“Itneeds to set out a reasonable road map with an appropriate increase to avoidshock increases that destabilise the market and business environment and spursmuggling of cigarettes and cause social security issues.”
Participantsagreed that a tax increase on tobacco is needed, but in the process of draftingthe amendments to the law it is necessary to carefully and thoroughly study theroad map and increases so that the tax policy will ensure harmony in thefollowing issues: regulating budget revenues, protecting public health,reducing smuggling of cigarettes, and stabilising production and business./.
VNA
