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Smuggling tobacco in Vietnam: Causes and effective solutions

Tobacco causes over 7 million deaths a year. The World Health Organization (WHO) is committed to stopping the tobacco epidemic towards a smoke-free world. Increasing tobacco taxes has been proven to be the most effective and effective tobacco control measure to reduce smoking.
However, in order to remain profitable and to maximize profits, tobacco companies seek to hinder, prevent or undermine tobacco tax increases. The main argument for cigarette companies is that raising tobacco taxes will increase cigarette smuggling and budget revenue losses.
 
Below is an analysis of Dr. Kidong Park (pictured), Chief Representative of the World Health Organization in Vietnam on the causes and solutions to the problem of illegal cigarettes in Vietnam.
 
smuggling-tobacco-in-vietnam
 
Foreign cigarettes are smuggled into Vietnam to evade import tax
 
First of all, it is necessary to distinguish between import tax, applicable only to imported cigarettes, and other taxes such as excise tax and value added tax (VAT) applicable to all cigarettes. As tobacco is a toxic product, the Government of Vietnam is maintaining high import tariffs to restrict the importation and consumption of foreign tobacco products.
 
Import tariffs are currently maintained at 135% of import prices. After applying the import tax, the excise tax and VAT will be applied to the import tax. Therefore, it is calculated that if a pack of medicine has an initial import price of VND10,000, the selling price will have to be VND50,000 per bag.
 
High import tax rates make it difficult for foreign cigarettes to be sold because of high selling prices, thus creating incentives for cigarette smuggling.
 
Even low or high excise taxes will have strong incentives to smuggle cigarettes in order to avoid import taxes and other taxes.
 
Because of the habit of using some of the major brands of ginseng (also known as "gu" smoking).
 
The reason for "gu" smoking is reflected in 4 points below:
 
Firstly: Results of a survey of tobacco consumption in 12 provinces in Vietnam, conducted by the University of Commerce, show that over 70% of people using illegal cigarettes are due to taste, curiosity, friends invited.
 
Second: According to the Tobacco Association report, 80-90% of the smuggled cigarettes belong to the two brands Jet and Hero. These two labels have very high levels of tar and nicotine, which are suitable for heavy smokers.
 
Third: "gu" smoking is expressed through regional factors. Adult GATS 2015 data show that 91.8% of the Jet and Hero branded drugs are consumed in two regions, Southeast and South West.
 
In particular, up to 75% of the consumption of these two brands is within the 10 provinces of Binh Thuan, Tay Ninh, Ho Chi Minh City, Long An, Vinh Long, Dong Thap, An Giang, Kien Giang, and Can Verse.
 
The two provinces with the highest consumption of illegal drugs are Ho Chi Minh City (accounting for 20.6% of consumption) and An Giang (accounting for 13.2% of consumption).
 
And fourth: "Gu" smokers show that smokers are willing to pay higher prices for pirated products than legal drugs at lower prices. According to the GATS, the average price for Hero and JET is between 30% and 60% higher than the average price of legitimate cigarette brands.
 
How does international cigarette smuggling work?
 
From the above mentioned points, in Vietnam, cigarette smuggling has no relationship with high or low special consumption tax. This is also reflected in the experience of other countries.
 
By analyzing data from 76 countries, WHO found that in countries with low cigarette prices, smuggling was even more likely than in countries with high tobacco prices and taxes.
 
Moreover, many countries have successfully controlled tobacco smuggling even as taxes and tobacco prices rise.
 
In Italy, for example, cigarette smugglers were estimated at a high level (13%) in 1992. The government decided to increase the excise tax on cigarettes three times during the period 1993-2000 to increase the excise tax rate. to 75.2% of the retail price. At the same time, in order to combat smuggling, the Italian government has taken several measures, including the introduction of bar codes on cigarette packs to help detect illegal cigarettes; passing the law on cigarette smuggling in the same way as other serious criminal offenses; enhanced coastal control and additional monitoring by law enforcement agencies, these agencies have been strengthened in power, logistics and technical support. The Italian government has also intensified its close cooperation with the European Union on smuggling. These efforts have paved the way for law enforcement and justice agencies to tackle the problem of smuggling effectively. As a result, the proportion of smuggled cigarettes dropped to about 3% in 2000 and has remained low since.
 
In ASEAN countries, we can also see examples. Philippines increases tobacco taxes annually from 2013 to the year
 
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