Health Taxes in the Lao PDR - Technical Note

Health taxes are excise taxes imposed on products that have a negative public health impact. Excise taxation is one of the most cost-effective policy measures to reduce consumption of these products, while also raising meaningful revenue. In the Lao PDR, the tax system under collects revenue, artificially inflating the role of excise taxes. With a mixed tax structure, the excise tax should rely more on the specific tax than ad valorem tax to improve health and revenue gains; tiers need to be removed since they cannot be justified by differential harm caused by cigarettes with different cost of production. Health excise tax reform is in line with the National Socioeconomic Development Plan Financing Strategy and The National Agenda of the government of the Lao PDR. In the Lao PDR, the latest excise tax reform approved in 2023 and effective Jan 1, 2024 is projected to have almost no impact on smoking prevalence and minimal impact of cigarette tax revenue in real terms. This technical note summarizes best practice and country examples in health excise tax reform