Updated May 2013
Impact on Revenue
Cigarette Price (2012)
Most popular local brand is A Deng costs 0.75 USD per pack
Most popular foreign brand is Marlboro costs 1.5 6 USD per pack
While nominal prices of expensive cigarettes have increased in the past ten years, nominal prices of cheaper local cigarettes have remained stable without much increase. Thus, local brands are much cheaper and more affordable to the majority of consumers. One of the main reasons for stagnant cigarette prices is the government’s ILA with the tobacco industry.
As a measure of affordability, the Relative Income Prices (RIP) of cigarettes has decreased over time. Although expensive brands have increased prices, they have in fact become more affordable over the years as have the local brands. It is expected that the cigarette affordability rate will increase even more due to economic and income growth, as well as the government’s limitation in increasing excise tax on cigarettes.
Tax Impact Scenario
In the first of four scenarios, based on a retail price of LAK 4,000 per pack for the popular cigarette brand in the year 2010, if an additional specific tax of LAK 100 is collected per pack, and the total tax collected per pack is LAK 579 , then the total cigarette tax revenue will be over LAK 91,706 million whereas the industry revenue will be LAK 522,954 million; however, but given the very small increase in tax and price, there are no expected lives saved from a reduction in consumption
In the second scenario, if the popular cigarette brand is sold at LAK 5,000 per pack in the year 2011 and the additional specific tax is increased to LAK 500 per pack, then the total tax collected per pack will be LAK 1,077, the total cigarette tax revenue will be LAK 162,885 million, and the industry revenue will increase to LAK 575,460 million but the smoking prevalence will drop by less than 1%.
The third scenario, if the popular cigarette brand is sold at LAK 6,000 per pack in the year 2012, the additional specific tax is increased to LAK 1,000 per pack, and the health tax is collected at LAK 200 per pack, then the total tax collected per pack will be LAK 1,855, the total cigarette tax revenue will be LAK 270,722 million, and the industry revenue will increase to LAK 586,309 million, but there will still be only a small reduction of the smoking prevalence and few lives saved.
In the fourth scenario, in the year 2013, if the popular cigarette brand is sold at LAK 7,000 per pack, the additional specific tax is increased to LAK 1,500 per pack, and the health tax is collected at LAK 200 per pack, then the total tax collected per pack will be LAK 2,452), the total cigarette tax revenue will be LAK 347,043 million, and the industry revenue will increase to LAK 624,682 million, while the smoking prevalence will drop only slightly by another by 0.47% (Table 2).
Based on a 2012 National Adult Tobacco Survey, around 43% of the adult male population and 8.4% of the adult female population are believed to be smokers. Prevalence was also shown to be much higher amongst the poor in rural areas.
Tobacco smoking causes a wide variety of serious diseases including stroke, chronic obstructive pulmonary disease (COPD) and lung cancer. The total costs of in-patient health-care of these smoking-related diseases in Lao PDR reached LAK 28,507,000,000 (USD 3,341,577) in 2007, representing 0.8% of Lao PDR’s GDP and 22% of Lao PDR’s health expenditure. Households directly financed 77% of these costs; the rest was financed either by the government (21%) or by the insurance sector (2%). From these findings, it can be seen that health-care costs are mainly borne by families themselves and given that the majority of these families are poor, greater challenges will emerge if effective measures are not taken to curb smoking in the country.