Range of tax hikes loom

Reading between the lines: a rise on cigarette taxes is also on the cards

They also proposed to reduce the tax on beer to stimulate competition.
Nguyen Lan Dung, a delegate from Dak Nong province, said if car taxes are set too low, too many consumers would have access to them, increasing traffic jams on a national road system already burdened beyond capacity.
Under new government proposals, the special consumption tax (SCT) on five-seat cars would be at 50 per cent, meaning a drop of 30 per cent for imported cars and a 10 per cent increase for locally assembled cars.
Dung predicted that with the lower taxes on imports, Chinese-made automobiles would flood the market.
“So to prevent more traffic congestion, the SCT on cars should be 70 per cent instead of the proposed 50 per cent,” he said.
Government proposals to put cigarette taxes at 55 per cent for 2006 and 2007, and 65 per cent in 2008 also drew protest from delegates who said that wasn’t high enough. Rates should be increased even more, they said, to cover state health costs for smoking-related illnesses.
Nguyen Thi Sau, delegate from Tuyen Quang province, said that “despite increasing earnings contributed to the state budget, the health of people should be the highest priority, so the tax on cigarettes should be increased.”
It is estimated that annual state revenues from the cigarette tax approach VND6 trillion ($380 million), but diagnosis and treatment of smoking-related diseases cost VND9 trillion ($580 million).
“I propose the tax level on cigarettes should be 100 per cent,” said Nguyen Lan Dung, adding that nearly 40,000 people die from smoking -related complications each year.
Only a decrease in the draught beer tax, from 70 per cent to 30 per cent in 2006 and 2007, and then a small increase to 40 per cent by 2008, received wide support.
However, Nguyen Thi Anh Nhan, a delegate from Hanoi, abstained, saying that a 40 per cent increase by 2008 would reduce beer consumption, hurting business for producers.
Minister of Finance Nguyen Sinh Hung said additional tax increases beyond those proposed on automobiles and cigarettes would hit businesses hard. He predicted that despite the moderate 10 per cent hike on local automobiles, local producers still will not be able to increase their prices to cover the cost, as they would lose their competitive edge over imports.
For cigarettes, Hung said, the increase may cause the industry to lose 15,000 production jobs and 200,000 jobs among tobacco growers, but he added that a beer tax kept at 30 per cent for 2006 and 2007 would help enterprises improve technology and increase competition.
However, he warned that the import duty might be reconsidered to make it lower for the demands of international economic integration.