Health Research Policy and Systems
Tobacco use increases the risk of many fatal diseases such as cancer, emphysema, heart disease and other circulatory diseases. If trends in tobacco use continue, approximately 500 million people alive today will die from smoking, and, by 2030, tobacco is expected to be the leading cause of premature death, accounting for about 10 million deaths per year.
While smoking prevalence has been decreasing in many of the more developed nations, rates have been high and increasing in many of the poorer nations. For example, smoking rates among Vietnamese males 15 year of age and older was 50% in 1997–98, but rose to 56% in 2002.
The Government of Vietnam is aware of the impact of smoking on public health. It has launched a campaign against smoking by issuance of a Government Resolution on National Tobacco Control Policy in 2000 with target of reducing the tobacco use prevalence rate to 20% for males and 2% for females in 2010. Vietnam was one of the first Asian nations to sign the World Health Organization’s Framework Convention for Tobacco Control in 2003.
Tobacco tax increase is among the measures suggested in the 2000 Resolution to achieve its goal of lower smoking prevalence. Other components of the tobacco control program include total ban on cigarette advertising, ban on distributing free cigarette samples, ban on vending machines selling cigarettes, and ban on smoking in all public places. Research evidence shows that imposing taxes on tobacco, as part of a comprehensive tobacco control program, is among the most effective methods of reducing tobacco use.[6,7] Higher taxes create incentives for some regular smokers to quit smoking, help prevent the young from initiating smoking, and reduces consumption among continuing smokers.
The majority of evidence on the price responsiveness of tobacco demand is for high-income countries were data and the research capacity exists. Estimates of the price-elasticity for overall cigarette demand fall in a relatively wide range due to model specification, data issues and estimating methodology,[8,9] but the majority center in the relatively narrow range from -0.25 to -0.5.[11,12] Evidence does indicate that low income groups in the high income countries are more sensitive to cigarette prices compared to higher income groups.
Recent studies have begun to focus on tobacco consumption in low-income countries, including South East Asia. For Indonesia, Djutaharta et al. (2002) used time-series data to estimate cigarette price elasticities in Indonesia ranging from -0.32 to -0.57, Adioetomo et al. (2001) used household level survey data to obtain a conditional (i.e., on quantity smoked per smoker) price elasticity of -0.6, but the impact of price on smoking participation (i.e., the decision to smoke) was not significant. For Sri Lanka, Arunatilake (2002) used household level data and estimated that the price elasticity was -0.53 for the whole sample and between -0.68 and -0.29 for the poorest two quintiles, Arunatilake and Opatha (2003) used aggregate monthly data and estimated price elasticities ranging from -0.227 to -0.908. A price elasticity of tobacco demand in Thailand of -0.67 was estimated by Supakorn (1993) using aggregate tobacco consumption. Isra et al. (2003)  used a linear expenditure system and household level data, and found the price elasticity of the demand for tobacco products of -0.39. They also found that poorer smokers were more responsive to tobacco prices than their richer counterparts. Karki et al. (2003) estimated a conditional price elasticity of cigarette demand of -0.42 and a total price elasticity of -0.88 in Nepal using household data. For Myanmar, Nyo Nyo et al. (2003) obtained a total price elasticity of -1.62 using household data. A WHO study using time series data obtained an overall price elasticity in Vietnam of -0.53 for cigarettes, but did not take into account a possible substitution into other tobacco products. Also for Vietnam, Laxminarayan and Deolalikar (2004), controlling for use of other tobacco products, obtained a price elasticity of smoking initiation of -1.18, but did not find a significant impact of cigarette price on quitting. Guindon, et al. (2003) estimated the demand for cigarettes in South-East Asia using panel data. They obtained short-run price elasticity estimates ranging from -0.17 to -0.78, with most estimates clustering at around -0.74, and long-run elasticities ranging from -0.4 to -1.21. Few studies suggest a limited impact of price on smoking behavior, but a study of cigarette demand in China and Russia obtained elasticities ranging from 0 to -0.15 using micro-level data. Although variations exist in the elasticity estimates and in the quality of the studies, the evidence strongly confirms a negative relationship between smoking and cigarette prices.
Public policy makers can use tobacco taxes to manipulate cigarette price. Tobacco tax rates vary from country to country. In high-income countries, the tax component often accounts for at least two-thirds of the retail price of a pack of cigarettes. In low-income countries, on the other hand, it generally accounts for less than half of the retail price. In the countries attempting to reduce tobacco consumption, the tax component is typically between two-thirds and three-fourths of the retail price of a pack of cigarettes.
Vietnam has relatively low cigarette taxes leading to low cigarette prices. (see Figure Figure1).1). Cigarette prices relative to income are higher than many other countries, but the price-income relationship has fallen quite dramatically in Vietnam between 1990 and 2001.