BACKGROUND: The affordability of tobacco products is a crucial determinant of smoker behavior, particularly in low- and middle-income countries like Viet Nam, where economic growth has accelerated. Despite a tobacco tax increase in 2019, tobacco products remain relatively affordable due to income growth exceeding price increases. Our study examines trends in tobacco affordability in Viet Nam from 2018 to 2020, focusing on the impact of the 2019 tax increase.
METHODS: We analyzed data from (i) three waves of a survey conducted by the Development and Policies Research Center (DEPOCEN) between 2018 and 2020 as part of the project "Making Tobacco Taxation Work in Viet Nam," funded by the International Development Research Centre (IDRC) and (ii) the Viet Nam Household Living Standards Survey in the same period. Affordability was measured using various Relative Income Price (RIP) indices, calculated as the ratio of cigarette price to income or expenditure. Robustness was ensured using alternative methods, including district-level data and fixed-effects models to control for unobserved heterogeneity. We also use an instrumental variable approach to address endogeneity problem.
RESULTS: The findings reveal that individual incomes grew faster than tobacco prices post-2019, making tobacco products more affordable despite tax increases. RIP values showed significant differences across regions and income levels, with affordability remaining high among low-income groups. The tax increase in 2019 did not significantly impact affordability in 2020, indicating the need for more substantial adjustments. Robustness checks confirmed the reliability of our findings.
CONCLUSIONS: Current tobacco tax policies in Viet Nam are insufficient to counteract the effects of rising incomes. To achieve public health objectives and reduce tobacco consumption, future tax policies must be more progressive, focusing on a tax structure that aligns with economic growth, as recommended by the WHO Framework Convention on Tobacco Control.