Between 2005 and 2009, when the tax was hiked by 20 percentage points, cigarette smuggling jumped by 80 per cent. — Phto petrotimes.vn

HCM CITY (Biz Hub)  — Increasing the special consumption tax on tobacco is essential but should not be done next year since smuggling is rampant, cigarette companies and the Viet Nam Tobacco Association told a seminar late last week to discuss amendments to the Law on Special Consumption Tax.

They said the smuggling would increase further and that the tax should only be increased when contraband can be kept out.

Pham Kien Nghiep, general secretary of the Viet Nam Tobacco Association, said between 2005 and 2009, when the tax was hiked by 20 percentage points (from 45 per cent to 65 per cent), cigarette smuggling jumped by 80 per cent.

An expert said that the hike must be effected only in 2016 and the tax rate must not be above 80 per cent.

But the ministries of Finance and Health rejected their arguments, saying the time has come to increase the tax.

Smoking damages human health, they said.

Viet Nam has one of the highest smoking rates in the world, with more than 47 per cent of men aged over 15 and 1.4 per cent of women using tobacco.

The finance ministry plans to increase the tax on tobacco products by 10 percentage points to 75 per cent by July 2015, and by another 10 per cent in 2018.

It considered and rejected a second plan involving a combined excise duty of VND500 per pack and increasing the current ad valorem tax rate by 5 percentage points once each in July 2015 and 2018.

But it said it would continue to talk to companies and business groups.

It will submit a draft to the Government next month and the National Assembly in October.

If approved, the amendments will take effect in July 2015. —VNS