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I would like to thank National Assembly TV for the opportunity to contribute to this timely and important panel. It is an honour to join you today.
High rates of smoking are threatening Viet Nam’s ability to achieve the targets of the National Strategy on Prevention and Control of Tobacco Harms, and Viet Nam’s long-term aspiration of becoming a high-income country by 2045.
We believe that Viet Nam’s lawmakers have a unique opportunity during the upcoming National Assembly hearings on the revision of the Excise Tax Law, to protect people from the dangers of tobacco use – and in doing so to support Viet Nam’s future health and prosperity.
To achieve this, the very strong recommendation of the World Health Organization is for Viet Nam to apply a higher level of tobacco tax.
Today, to explain the rationale for our recommendations I will address three key topics: international tobacco tax trends, how higher tobacco taxes can help to achieve Viet Nam’s development aspirations, and false claims often made by the tobacco industry.
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First, the international trends.
One of the reasons for Viet Nam’s very high smoking rate among men (over 40%) is that tobacco is incredibly cheap, because of very low taxes. And as incomes have risen but tobacco prices have not, tobacco has become even more affordable.
Prices and taxes on tobacco in Viet Nam are among the lowest in the ASEAN region.
However, the international trend is towards higher levels of tobacco taxation.
Around the world, 60 countries, with a total combined population of more than 1.6 billion people, now impose taxes of 70% or more of the retail price, in line with or close to the WHO-recommended best practice of a tax rate of at least 75%.
These countries have made smoking much less affordable – leading to great improvements in smoking rates in a relatively short time. This is because significantly raising tobacco taxes and prices is the single most effective measure for reducing smoking rates.
This is also a measure called for in the WHO Framework Convention on Tobacco Control, the international tobacco control treaty which Viet Nam ratified in 2004.
In the Philippines, from 2012 to 2022 tobacco tax increases not only helped reduce smoking by 30% in just 11 years; in the same period, government revenue from tobacco taxation grew dramatically – from 680 million US dollars to 2.9 billion US dollars.
In summary, tobacco taxes are increasingly being used worldwide to prevent disease and improve health, while generating revenue for government priorities.
Let me now turn to the second topic, WHO’s specific recommendations, which are outlined in a new Policy Brief released this week, Tobacco Taxation to Advance Health and Sustainable Development in Viet Nam.
The Brief explains the use of WHO’s tobacco tax simulation model to predict how changes in tobacco tax will affect the price of cigarettes, smoking rates, and Government revenues. The conclusion is that the Ministry of Finance’s published tobacco tax options would be steps in the right direction, but we need a higher increase to achieve national tobacco control targets, and to protect the country’s economic development.
In particular, our modelling shows that a higher specific tax, reaching 15,000 VND per pack by 2030, on top of the current tax, would reduce men’s smoking to 35.8%, in line with the national target. This would also massively increase annual tax revenues, bringing in an extra 29.3 trillion VND per year in 2030, compared to 2020.
Reducing smoking rates to this level would reduce the significant economic costs inflicted by high rates of tobacco use – some VND 108 trillion or 1.14% of GDP annually. These are avoidable costs, which come at the expense of Viet Nam’s current and future prosperity.
On this point, it is worth highlighting that young people are most sensitive to price increases. Raising tobacco taxes can prevent them from starting to smoke, akin to giving them a vaccine which protects them for life – because people are much less likely to start using tobacco when they are older.
Thirdly, let me briefly address two common myths spread by the tobacco industry to protect their profits.
The first false claim is that higher taxes – and therefore higher prices – will result in more tobacco being smuggled into Viet Nam.
This is not true. The evidence and international experience show that smuggling is more influenced by enforcement capacity than prices and taxes.
The second false claim made by the tobacco industry is that higher taxes will mean higher unemployment.
Again, not true.
When the price of tobacco goes up, people’s spending shifts to other products. Plus, increased Government revenue can be invested back into more productive sectors of the economy.
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To conclude, Viet Nam has made some welcome progress in the fight against tobacco harm in the past decade or so. However, we need stronger action – through higher taxes – to achieve the Government’s targets for smoking reduction, and in doing so, to protect health and save lives.
Applying a higher tobacco tax would protect Viet Nam’s most precious capital, the health of its people, and support the country’s ambitions for a healthier and more prosperous future.
Thank you for the opportunity to share WHO’s perspective and recommendations with you, and I wish you success in your deliberations.
Xin cám ơn!