Health Ministry Keen to Amend Tax Agreement with Lao Tobacco Company

A man smoking a cigarette. (Photo: World Bank).

On Friday, the Ministry of Health discussed the current tax agreement between the government of Laos and Lao Tobacco Company (LTC) which it considers unfair.

Dr. Maniphan Vongphosy, Southeast Asia Tobacco Control Alliance Coordinator, said at a press conference on Friday that the government of Laos had received too little in tax revenue from the tobacco company.

She pointed out that the agreement with Lao Tobacco, which stretches over 25 years and will be automatically renewed, is unfairly beneficial toward the tobacco company.

Under the agreement, the company’s tax rate is set at a low figure of 15% if production costs are less than LAK 1,500 per pack and 30% if they are equal to or greater than LAK 1,500 for each pack of product.

This also allows the company to avoid tax hikes, while the government must bear the social and economic costs involved with tobacco use, such as its impact on public health.

“The agreement between the government and company was made without the thorough consideration of public health,” Dr. Maniphan said during the conference.

The agreement will expire in 2026, at which point the government must decide whether to extend or negotiate, failing which the company will continue to pay the low taxes.

LTC has also refused to pay specific taxes (LAK 600/pack) and dedicated taxes for the Lao PDR Tobacco Control Fund, according to the ministry.

From 2002 to 2019, LTC has caused the government to lose tobacco tax revenue of LAK 1,429 billion (over USD 80,000) and it will continue to do so unless the agreement is amended in 2026, according to the ministry.

The Director General of the Department of Hygiene and Health Promotion, Dr. Phonepaseuth Ounaphome, called for a new agreement that reflected a change in tax structure and advised the ministry to prepare information on public health for the government to reconsider.

According to the World Health Organization (WHO), smoking is the leading cause of preventable death in Laos, accounting for an estimated 7,000 deaths each year with an economic cost of an estimated LAK 3.6 trillion (about USD 27 million) each year.