Abstract
This article provides the first comprehensive picture and independent estimates of both illicit cigarette consumption and the resulting government tax revenue loss in Vietnam using data from a representative survey of cigarette smokers in 12 Vietnamese provinces. The survey consisted of face-to-face interviews and on-site cigarette pack examinations. We find that more than 720 million illicit cigarette packs, or 20.7% of total cigarette consumption, circulated in Vietnam in 2012. Consequently, government tax revenue loss due to illicit trade ranged from US $223 to 295 million. Our estimates also indicate that (1) the most popular illicit brands were Jet and Hero, both were sold at higher prices than the average legal brand; (2) the average price of illicit cigarettes was 51% higher than the average price of legal cigarettes; and (3) majority of illicit cigarettes were sold at convenience stores, which were registered and licensed businesses. Our findings suggest that prices are not a driver of illicit cigarette consumption in Vietnam, and this illicit trade is at least partially a consequence of weak market control enforcement.
Highlights
The illicit trade in tobacco products is of interest to both governments and public health circles.Governments are concerned because tax revenues suffer from the avoidance and evasion of cigarette taxes
Our estimates indicate that (1) the most popular illicit brands were Jet and Hero, both were sold at higher prices than the average legal brand; (2) the average price of illicit cigarettes was 51% higher than the average price of legal cigarettes; and (3) majority of illicit cigarettes were sold at convenience stores, which were registered and licensed businesses
We report the estimates of tax revenue lost to the illicit cigarette trade and discuss our findings in relation to the tobacco industry’s estimates
Summary
The illicit trade in tobacco products is of interest to both governments and public health circles.Governments are concerned because tax revenues suffer from the avoidance and evasion of cigarette taxes. The illicit trade in tobacco products is of interest to both governments and public health circles. Public health specialists are concerned because by increasing the accessibility and affordability of tobacco products, illicit cigarette sales likely undermine the effectiveness of price and tax measures that aim to reduce consumption. Illicit sales weaken other public policies, such as regulations on health warnings, packaging, and ingredients, since illicit cigarettes are not likely to follow any of those regulations [2,3]. The tobacco industry has consistently claimed that tax increases, graphic health warnings, restrictions on packaging, and regulations of ingredients are all drivers of the illicit cigarette trade [4]. Since 2006, Vietnam has imposed a single ad valorem (value-based) excise tax rate on the ex-factory price on all cigarettes. The statutory excise tax rate was 65% of the ex-factory price in 2012, the actual rate on the retail price comes to only approximately 32%
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