The research of Vietnam Public Health University shows that each year,

smoking kills 40,000 Vietnamese, four times the fatalities from traffic
accidents . Total expenditures of treating three common diseases involving
smoking include lung cancer, chronic obsttructive pulmonary disease and
ischemia heart disease comes to 1,100 billion VND/year.

According to Mrs. Hoang Anh from Health Bridge Organization in Hanoi, at the
same brand of cigarette, a pack of it in Vietnam has the cheapest price. The
average retail price of cigarettes is 0.22 USD/pack – a price that almost cannot
be found anywhere in the world. Thus, the youth is easier to approach smoking
since ciagarettes are too cheap and too simple to buy. In fact, as the statistics of
SAVY (Survey Assessment of Vietnamese Youth) in 2003 – 2004, in the age of
14 – 25, 43.6 percent smoker is male and 1.2 percent is female, the rate of
smokers increase with age. 71.7 percent male smoker continues smoking. Mrs.
Hoang Anh said the reason of low-cost cigarette is because in Vietnam, the tax
imposed on cigarettes is among the lowest. Recently, the WHO has
recommended the cigarette tax should be at 65 percent / retail costs, however,
Vietnam has just reached 46 percent. The price elasticity concepts can be used
in this case in an effort to deter people form smoking.

Tobacco products are kind of goods with inelastic demand since there is amost
no substitute goods for them. Therefore, it is hard to reduce the amount of
people smoking once they have been addicted. Moreover, cigarettes also have a
high income elasticity of demand as people with high income will be willing to
buy a lot more of packes of cigarettes, thus, they become more and more
addicted.

One way to reduce youth smoking in particular and people smoking in general
is to raise the price through higher cigarettes taxes. The reduction amount of
youth smoking depends on the price elasticity of demand. This elasticity is
elastic for teenagers than for adults. It is because teenager income is relatively
low, the portion spent on cigarettes usually bigger than that of adult smokers. In
addition, peer pressure affects a young person’s decision to smoke more than an
adult’s decision to continue smoking. The impact of a higher price also reduces
smoking by peers and thus, drives down the number of young smokers.
Moreover, young smokers not yet addicted to nicotine are more sensitive to
price rises than adults, who are likely to be heavy smokers. The experience from
other countries encourages the efficiency of higher cigarette taxes in reducing
people smoking. For example, Thailand government has regularly raised the
cigarettes taxes nine times within 15 years (1992 – 2007) and recently, the
amount of tax collected is 2-3 times more than Vietnam and the number of
smokers is two-thirds less than Vietnam.
Hence, Vietnam need to base on those determinants involving the price
elasticies which bring about effects on demanding for cigarettes to apply in
imposing appropriate taxes on that product in the earliest time. In fact, a WHO
research indicates that if Vietnam raises about 20 percent the cigarettes taxes,
then the retail costs will increase 10 percent. Thus, the government income will
increase 1,500 – 2000 billion VND and avoid 100,000 fatalities by smoking
anually.