Evidence on Illicit Trade of Tobacco Products in Viet Nam

This Policy Note was written by Development and Policies Research Center in Viet Nam and the Tobacconomics team. The policy note assesses the impact of tobacco taxes on illicit trade based on existing literature from the country. The researchers find that raising cigarette prices through substantial tax increases has had no impact on illicit cigarettes as Vietnamese smokers have not switched to more expensive or illicit cigarettes when prices increased. Instead, they are more likely to quit smoking, which suggests that tax increases effectively reduce consumption. Currently, illicit cigarettes tend to be more expensive than legal brands in Viet Nam which may explain these consumption patterns. Even in the case of a substantial increase in cigarette taxes, the average licit pack would remain more affordable compared to an average illicit pack. Furthermore, findings show that illicit trade declined even after the excise tax increase implemented in 2016, from 20.7% in 2012 to 13.72% in 2017. The policy note concludes with recommendations to policy makers to raise tobacco taxes to reduce consumption, likely without substantially impacting the illicit market.

[VIETNAMESE]

This policy note is part of series discussing the impact of tobacco tax increases on: consumer behavior and productivity and employment.