Producers call for tobacco tax cuts (fwd)

[Robert Weissman <rob@essential.org>]

Producers call for tobacco tax cuts
by HUW WATKIN in Ho Chi Minh City
Source: South China Morning Post, Thursday, 8/19/99

Tobacco producers in Vietnam have called for a reduction in taxes imposed
on their products as part of a series of measures to combat the smuggling
of enormous numbers of cigarettes from neighbouring Cambodia.

Authorities estimate 10 million cigarettes, with a street value estimated
at US$350,000, are smuggled into Vietnam's southern provinces from
Cambodia each day, causing losses to the treasury in the region of $37
million each year.

Stricter policing in the past two weeks has led to a reported decrease in
the flow of illicit tobacco across the border, and is thought to be behind
a surge in the cost of smuggled cigarettes available in Ho Chi Minh City
by an average of 15 per cent.

According to industry sources, a clampdown on a smuggling route via
southern Tay Ninh province has resulted in sharp price increases for the
Jet and Hero brands, and prompted increased output of the state-owned
Saigon Cigarette Factory's Sai Gon and Du Lich products.

Authorities have conceded that the reduced flow of contraband cigarettes
is probably only temporary as smugglers have proved in the past that they
quickly adapt to tighter border controls.

Nigel Venning, corporate and regulatory affairs manager with British
American Tobacco in Ho Chi Minh City, said smuggling could only be
defeated by a range of policy measures including more rigorous policing,
the introduction of tax stamping and a reduction of taxes levied on
tobacco products.

"Smuggling is a worldwide phenomena which tends to flourish where [tax] on
products is high," Mr Venning told a recent anti-smuggling seminar held in
the central Vietnamese city of Da Nang.

"High tax rates result in high prices for locally made products due to
increased manufacturing costs, which tend to encourage smuggling . . .
reduced tax rates lead to increased [locally made consumption] and
ultimately increased tax revenues for the government," he said.

Mr Venning said a delegation of Vietnamese officials was visiting Thailand
and Malaysia to study tax-stamping procedures which enabled authorities to
more easily identify contraband tobacco products.