The Potential Impact of Tobacco Tax Increase on Tobacco Use 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 cigarette consumption in the context of the proposed tax reform which would transition Viet Nam from an ad valorem to a hybrid tax structure. This tax reform would reduce brand price dispersion, preventing smokers from trading down to more affordable products. The researchers find that significantly increasing cigarette prices would effectively reduce consumption and raise revenues. A 10% increase in cigarette prices would reduce the number of male smokers by 270,000 and reduce the daily smoking prevalence from 30.7% to 29.9%. The policy note concludes with recommendations for policy makers to seize the opportunity to significantly increase cigarette prices with effective tobacco taxation.

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