SEATCA TOBACCO TAX PROGRAM
vietnam
The overall progress of tobacco tax policy implementation:
Relationship between tobacco taxes, price and public health
Vietnam does not regularly adjust tobacco tax level. The country applied tobacco tax rate of 65% since 2008 until 2015. The National Assembly approved the revised tax law to increase tobacco tax rate to 70% to be effective from 1 January 2016 and 75% from 1 January 2019 until present. Vietnam is planning to conduct the reform on tobacco tax rate and system as the current tax rate is not high enough to make the tobacco products less affordable over time in order to reduce consumption and prevalence.
Level of tax rates to apply
Vietnam National Assembly passed the revised Law on Excise tax in 2014 only two milestones of increasing tobacco excise tax rates in 2016 and 2019. In addition to this, the government does not regularly monitor tax structure and targets to achieve public health objectives. Tax increase in Vietnam is not done annually. The excise tax law was revised last time in 2008 with tax rate increased from 55% (in 2006) to 65% (in 2008). The government applied the same tax rate of 65% for 6 years however; the law was revised again in 2014. The reason behind tax increase is to reduce smoking rate and implement the Government strategy on tobacco control to reduce tobacco consumption considerably.
COMPREHENSIVENESS/SIMILAR TAX BURDEN FOR DIFFERENT TOBACCO PRODUCTS
Since the government has applied ad valorem tax on all tobacco products making the products with higher value of production cost pay higher amount of excise tax, while the products with lower value of production cost pay lower amount of excise tax. There is no available study to support the conclusion of product substitution and the shifting to cheaper products. However, there might have this risk because raising tax will increases the price gap between premium/mid-price/economic tobacco products which consumers (especially young and poor population) will shift to cheaper products in the same product category or to cheaper tobacco product categories.
Authorization/licensing
Vietnam licenses: manufacture of tobacco products under Article 17, Decree No 67/2013/ND-CP and management of machinery and equipment for tobacco manufacturing under Article 33 in the same Decree; import or export of tobacco products under Article 30, Decree No 67/2013/ND-CP and import or export of manufacturing equipment under Article 34, Decree No 67/2013/ND-CP; retailing of tobacco products under Article 26, Decree No 67/2013/ND-CP; growing of tobacco, except for traditional small-scale growers, farmers and producers under Article 7 on “issuance to tobacco cultivation investment”, under Decree No 67/2013/ND-CP dated 27/06/2013; wholesaling, brokering, warehousing or distribution of tobacco and tobacco products except manufacturing equipment under Article 26, Decree No 67/2013/ND-CP dated 27/06/2013. However, transporting commercial quantities of tobacco products or manufacturing equipment does not require a license from the government.
Warehouse system/movement of excisable goods and tax payments
Vietnam does not adopt and implement measures and systems of storage and production warehouses to facilitate excise controls on tobacco products. The country imposes excise taxes at the point of manufacture and importation and release for consumption from the storage or production warehouses. The tax payers are required to be remitted at fix intervals on monthly basis. Nevertheless, they are not required to declare production/sale volumes by brand, price by brands, taxes due and paid, or volume of raw materials. There is no disclosure of the industry information to the public.
Authorization/licensing
Currently, Vietnam does not have a law or regulations on anti-forestalling.
Fiscal markings
The government requires the application of fiscal markings on tobacco products. For domestically produced cigarette, the government issued the Decision No. 175/1999/QD-Ttg .According to the Decision, as from 1 April 2000, all packed of cigarettes domestically produced by enterprises established according to law, when being delivered or circulated on the market, must be affixed with stamps as prescribed. For imported cigarette, the government issued the Decision No. 138-TC/CTN. According to the Decision, as from 3 August 1989, all types of foreign imported cigarettes when being delivered or circulated on the market, must be affixed with imported tax stamps uniformly nationwide issued by the Ministry of Finance.
Vietnam also applies the pictorial health warning on tobacco products. It is one of the measures to distinguish between legal tax-paid product and smuggled cigarette. But pictorial health warning cannot distinguish between legal tax-paid products and unpaid-tax products. The fiscal markings system in Vietnam is not part of tracking and tracing system. However, regarding the standard pack size policy, according to the Article 24 of Law on tobacco harm prevention regulates that the number of cigarette per pack is not less than 20 sticks, except cigars and cigarette serving for purpose of exportation. This regulation will come to effect in May 2016.
Enforcement
The government clearly designates and grants appropriate enforcement authorities on tobacco tax policy. The tax enforcement authorities and their responsibilities are prescribed in the Law No. 78/2006/QH11 on Tax administration and Law No. 21/2012/QH13 on Amending and supplementing a number of articles of the law on tax administration. There is information sharing among the enforcement authorities according to the Article 72, Article 73 and Article 74 of Law 78/2006/QH11 on Tax administration. In case the tax payers found to be non-compliance with the tax laws, they will be penalized as regulated in the Law on Tax Management and were detailed in Decree No. 129/2013/ND-CP on penalties for administrative violations pertaining to taxation and enforcement of administrative decisions on taxation.
Use of revenues – financing of tobacco control
Vietnam Tobacco Control Fund (VNTCF) was established under the Tobacco Control Law passed by the National Assembly of Vietnam on 18 June 2012, effective on 1 May 2013. The fund is for the prevention and control of tobacco harms. The funding sources are from compulsory contributions of tobacco manufacturers and importers, which are calculated in a percentage of the excise tax-liable prices according to the following roadmap; 1% from May 1, 2013; 1.5% from 1 May 2016; and 2% from 1 May 1 2019 onward. In addition, VNTCF received findings from donations and voluntary contributions of agencies, organizations and individuals at home and abroad and other lawful revenues. The tobacco tax revenues are not specifically dedicated to VNTCF, however, the mentioned compulsory contributions of tobacco manufacturers and importers are sustainable for VNTCF.
Tax-free /Duty-free sales
Vietnam does not prohibit the sale to and/or importation by international travelers, of tax-free or duty-free tobacco products. Decision 31/2015/QD-TTg dated 04/08/2015 regulated that the international travelers can bring the limits of goods as below free excise tax duty, free VAT and free import duty: cigarette: 200 sticks, cigar: 100 sticks and shredded tobacco: 500 grams. Travelers must pay duty for the number of tobacco products that exceed this limit. Tobacco products are allowed to sell at duty-free store with the condition that it must bear the stamps “VIETNAM DUTY NOT PAID” issued by the Ministry of Finance according to Decision 24/2009/QD-TTg dated 17/02/2009 on Promulgating the regulation on duty-free trading.
Protection of tax policies from vested interests
In Vietnam, there is no a procedure/policy that in development of tobacco tax and price policies in order to protect such policy from commercial and other vested interests of the tobacco industry. According to the law on legislative development in Vietnam, all related parties to the law under development need to be consulted. Therefore, in the development of any legislative related to tobacco, tobacco industry represented by Ministry of Industry and Trade is invited to provide comments to the law-making process.
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