VAT Added to Cigarette Supply

PHNOM PENH – Value-added tax (VAT) of 10 percent will be levied on all cigarettes from August 1, the Finance Ministry says.  It will be applied on top of the 25 percent excise already imposed on tobacco imports.

All business owners who import or distribute imported cigarettes to sell locally must apply VAT in the same manner as it is applied to other taxable imports, the ministry said. The measure was to strengthen the transparent and consistent implementation of VAT.

VAT that is paid during the import or local purchase of cigarettes is allowed as an input tax credit for deduction with output tax.

Cambodia Movement for Health executive director Mom Kong said it was a good initiative, expecting the government to raise the special tax on cigarettes soon to raise revenue.

Raising taxes on tobacco products is a win-win strategy, with the state receiving more revenue and cutting public health care costs. Deaths and illness due to tobacco was also declining.

“We would like to support the Ministry of Economy and Finance in the tobacco tax reform process and find that the additional tax starting at 500 riel per pack of cigarettes or more is most appropriate for now,” he said.

The World Health Organization said an additional tax of 500 riel per pack would increase cigarette prices by 15 percent, reduce 30,000 smokers in the next year and prevent 10,000 premature deaths from smoking in the next 10 to 15 years.

“The increase of 500 riel cigarette per pack will increase state tax revenue by 213 billion riel (approximately $53 million) per year,” Mom said, citing WHO figures.

Cambodia has the lowest tax on cigarettes, with 25%  excise on local retail cigarettes and 31 percent for imported cigarettes, while Thailand’s tax is 70 percent, Singapore 67.5 percent, Myanmar from 50 percent to 60 percent and Vietnam at 35 percent.

Raising tobacco taxes is the single most effective measure to reduce the risks posed by tobacco, WHO says.

About 15,000 Cambodians die each year from diseases caused by tobacco use, including stroke, coronary heart disease, lower respiratory infections, chronic obstructive pulmonary disease and lung cancer, bronchial cancer, and trachea cancer, according to WHO.

Thirty-three percent of all deaths occurred in low-income people. In addition, tobacco use caused a loss of $649 million, equivalent to 3 percent of Cambodia's gross domestic product (GDP).

Teng Yalirozy contributed to the story

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