Impacts of higher tobacco tax on output and employment in Vietnam

Purpose: The purpose of this study was to evaluate how higher tax on tobacco would influence output andemployment in Vietnam.Design/methodology/approach: The authors used micro-simulation techniques proposed by Walbeeck(2010). Both national data (from Input–Output Table) and household data (Vietnam Household Living StandardSurvey) were utilized.Findings: The results showed that any increase in the excise tax for tobacco would have positive net impactson both national output and employment. The tobacco industry would not be significantly affected due to itssmall contribution to national economy and employment. More importantly, money released from reducedtobacco consumption would be reallocated to other goods and services, and thus outputs and jobs innontobacco sectors would increase.Research limitations/implications: The key limitation of this study was due to unavailability of updateddata, especially Input–Output Table as well as household living standard survey.Practical implications: This study concluded that government should increase tax on cigarette along with awell-planned roadmap to avoid unexpected consequences on income and employment of laborers in this sector.Originality/value: This study replicated a popular approach in order to verify an important governmentpolicy (i.e. effect of tax on tobacco on output and employment) under Vietnamese context