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Tobacco Taxation Simulation for Vietnam

Author

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  • Ngoc-Minh Nguyen

    (Development and Policies Research Center (DEPOCEN), Suite 305 - 307, 12 Trang Thi Street, Hoan Kiem, Hanoi)

  • Anh Ngoc Nguyen

    (Development and Policies Research Center (DEPOCEN), Suite 305 - 307, 12 Trang Thi Street, Hoan Kiem, Hanoi)

Abstract

We simulate the impact of changes in tobacco taxation on tax revenue and public health outcomes to provide empirical evidence for the tobacco tax reform proposals of the Ministry of Finance in Vietnam. Different tax policy scenarios are compared to understand the role of tax structures on government revenue and the tobacco industry. While increasing tobacco prices through taxation helps reduce tobacco consumption by 22.68%, switching from a uniform ad valorem to a mixed tax system using a maximum retail price as a tax base could compensate for the reduction in tobacco consumption and ensure an increase in total tax revenue. In addition, the supply chain margin considerably depends on the tax structure. Changing from an inclusive VAT to an exclusive VAT generally decreases the supply chain margin of the tobacco industry and particularly makes the margin for the lower-price segment negative, implying a loss for this segment.

Suggested Citation

  • Ngoc-Minh Nguyen & Anh Ngoc Nguyen, 2025. "Tobacco Taxation Simulation for Vietnam," Working Papers 192, Development and Policies Research Center (DEPOCEN), Vietnam.
    • Handle: RePEc:dpc:wpaper:0192
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