Category: Taxation

Ireland: Implementing New Vape Tax ‘Challenging’

Inside a local vape shop in Killarney, Ireland. (Credit: Timothy Donahue)
Ireland’s Finance Minister Michael McGrath has said introducing a new tax on vapes will be “challenging” to implement.
The country’s government intends to apply the levy on e-cigarettes as part of a public health response to vaping.
“A domestic tax will require significant IT, administrative, control, and compliance costs,” McGrath said.
The proposed tax on both vapes and e-cigarettes had first been flagged in Budget 2024 speeches when Mr McGrath cited the ongoing delays to EU directives on tobacco products, reports the Irish Examiner.
“While the implementation environment is challenging, it does not undermine the intention to apply a tax as one tool in the overall public health policy approach to e-cigarettes,” the finance minister said in response to a parliamentary question from Fianna Fáil TD Paul McAuliffe.
“Most excise taxes in Ireland are governed by EU legislation and this helps to reduce compliance and administrative costs,” McGrath said. “As e-cigarettes are not harmonized excisable products, the Revenue Commissioners will be unable to use existing movement controls and tax warehousing for tax collection purposes.”
McGrath confirmed that the e-liquid within vapes will be the primary component that is levied.
December 5, 2023
U.K. Considering New Tax on Vaping Products

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U.K. ministers are considering a new vapor tax as part of the move to create a “smoke-free generation” that would also include a gradual total ban on smoking, according to The Guardian.
Documents that were published along with Rishi Sunak’s first king’s speech show that an eight-week consultation on smoking and vaping is planned and will “explore a new duty” on vapor products.
There is an “important balance” that needs to be met to make sure cigarettes are taxed higher than vapes, The Guardian noted, citing Downing Street.
Ministers plan to introduce the new tobacco and vapes bill next month. It will include tighter restrictions on vaping and phase out the sale of cigarettes, making it so that children currently aged 14 or younger will never legally be able to purchase the products.
November 10, 2023
Ontario to Double Taxes on Vapes Sold in Province

Ontario, in partnership with Canada’s national government, will double the tax on all vaping products sold in the province.
The federal/provincial tax partnership scheme that was announced in 2022 allows provinces to double the current federal vape tax and keep half the proceeds, according to Vaping360.
The Canadian Vaping Association (CVA) urged the federal government to reconsider its proposal to impose an additional provincial levy, as this would effectively double the already substantial tax burden. “The CVA suggests a more equitable approach where the federal government shares the revenue generated by the current levy with the provinces,” the industry group wrote in a statement.
“With the introduction of the excise tax, depending on product type, vape products are now almost as expensive as cigarettes despite the significant reduction in risk,” the statement says.
The CVA cautioned that the increased tax may lead to more illicit trade. “Legal businesses will find it nearly impossible to compete with the unregulated market that remains largely unchecked. The consequence of such punitive taxation will be widespread business closures, significant job losses and an increase in criminal activity.”
“The CVA encourages the province to leverage its negotiating influence with the federal government to establish a fair revenue-sharing framework for the existing tax revenue. Preserving the regulated market, rather than destroying it, will lead to higher tax revenues. The additional revenue generated can be used by the province to increase enforcement resources and support educational programs for youth,” said Darryl Tempest, government relations counsel to the CVA.
November 7, 2023
Netherlands Votes on Motion to Introduce Vape Tax

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Dutch lawmakers on Oct. 26 voted for a motion to introduce a tax on vapor products, reports Dutch News. The move follows earlier reports that the Netherlands would not impose such a levy prior to the elections scheduled for November.
The government had been planning to wait until the introduction of Europe-wide legislation but given that is unlikely to happen before 2026, ministers agreed to take unilateral measures, if that is what MPs wanted.
One in five Dutch youngsters under the age of 25 uses e-cigarettes, and 70 percent of vapers also smoke tobacco cigarettes, according to the Trimbos addiction institute.
The 18 age limit for using vapes is also widely flouted and internet sales have flourished, De Telegraaf reported earlier this month.
Vaping is cheaper than smoking in the Netherlands, where a pack of cigarettes now retails for around €11 ($11.64). An e-cigarette with the equivalent of two packets of cigarettes in terms of nicotine costs around €6.
October 27, 2023
Netherlands: No Vaping Taxes Before Elections

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The Netherlands will not impose an excise tax on vapor products before the November 2023 elections, reports DutchNews.nl, citing De Telegraaf.
The news source added that even if the Netherlands received EU approval to impose a vapor product excise tax, the process would take several years to complete.
Although this current government did not work toward creating a vapor product excise tax, Junior Health Minister Maarten van Ooijen said that he would encourage the next cabinet to move ahead on a “national tax on e-cigarettes.” Van Ooijen added that such a tax would be “in the interests of public health.”
High cigarette prices have assisted smokers to move toward vapor products in recent years. However, the current cabinet focused on prohibiting flavored e-liquids and online vapor product sales to combat rising youth rates of vapor product usage.
“We need to take action against vapes as soon as possible to protect our children, as other EU countries have done,” Van Ooijen said.
The EU is expected to revise its Tobacco Products Directive in 2025.
October 17, 2023
Ireland Announces Vape Tax, Raises Cigarette Costs

Ireland increased the price of a pack of 20 cigarettes by €0.75 ($0.80) and announced a new tax on vaping products for next year, reports The Irish Times. Other tobacco products will be subject to a pro-rate increase.
The move “supports public health policy to reduce smoking levels in Irish society,” according to Finance Minister Michael McGrath.
“In light of public health interests, continuing delays to the revision of the Tobacco Products Tax Directive and the Program for government commitment to tax e-cigarettes and vaping products, I am proposing to introduce a domestic tax on these products [e-cigarettes and vaping products] in next year’s budget,” said McGrath.
“Considerable preparatory work” by the Department of Finance and Revenue will be necessary to draft the underpinning legislation, he said.
“Nicotine is one of the most addictive substances on the planet, and there has been an explosion in youth use of e-cigarettes that has been further fueled by the advent of disposable vapes,” said Chris Macey, director of advocacy with the Irish Heart Foundation. “We can’t afford to wait a moment longer than necessary to impose this tax.”
The Irish Heart Foundation called on the finance minister last week to introduce a €0.10 per milliliter tax on e-liquid.
Smokers’ rights group warned against unintended consequences. “Annual tax hikes on tobacco are punishing consumers for enjoying a perfectly legitimate habit,” said John Mallon, spokesperson for Forest Ireland. “Not only does it discriminate against consumers on lower incomes, [but] it will drive even more smokers to the black market.” Mallon said smokers “don’t deserve” the excise increase.
“Legitimate retailers will lose business to criminal gangs, and smokers who stay within the law will be further punished compared to those who, understandably, buy their tobacco from illicit traders,” he said.
October 11, 2023
Hawaii Sends 70 Percent Vape Tax Bill to Governor

Credit: Timothy S. Donahue
Lawmakers in Hawaii last week passed a “tax parity” law that applies the tax rate for traditional tobacco products to vaping products. If signed into law by Governor Josh Green, vaping products would be subject to a 70 percent wholesale tax—one of the highest rates in the country.
The bill, SB975 SD2 HD3, defines vaping products as “tobacco products,” and was negotiated in a marathon conference session between the State House and Senate just before the deadline for this year’s legislative session. The legislative session adjourns on May 4.
It isn’t certain the exact date the bill will be sent to Green, or if he intends to sign it into law. If signed, the tax will take effect Jan. 1, 2024. Currently, Hawaii has no tax on vaping products.
Right now, e-cigarettes only have the general excise tax (GET) of between 4.1 percent and 4.7 percent attached to them. Combustible cigarettes sold in Hawaii carry other taxes.
Last year, having survived a rollercoaster legislative session that saw the bill near death on multiple occasions, Hawaii’s ban on flavored e-cigarettes was signed by its governor.
May 2, 2023
Industry Thinks Korean Officials may Raise Vape Taxes

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The vaping and tobacco industries in South Korea are speculating that the government could raise taxes on e-cigarettes to increase tax revenue.
Even after officials faced fierce backlash from the sector and smokers, the country’s finance minister still commented on the possibility.
The remark was made by the country’s Economy and Finance Minister Choo Kyung-ho in a plenary session at the National Assembly on April 17, according to Pulse News.
In the session, lawmaker Bae Jun-young asked Choo a question about the government’s stance on taxing e-cigarettes, saying that “cig-a-like e-cigarettes contain harmful toxins like regular cigarettes.”
“I was aware that some officials from the Ministry of Health and Welfare recommended that e-cigarettes be classified as tobacco products, like other regular cigarettes,” said Choo, indicating that “cig-a-like e-cigarettes” should be taxed at a rate equivalent to taxes on regular tobacco products if the two have the same level of harmful effects on the human body.
The Ministry of Economy and Finance said that “there is no consideration on raising tax on e-cigarettes.”
Vaping products are currently taxed lower than regular nicotine delivery systems. For regular cigarettes priced at 4,500won ($3.39) per pack, the government levies a tax of 3,323won, including a special consumption tax of 594won and excise tax.
For e-cigarettes, however, the tax amounts to only 90 percent of the regular tax at 3,004won.
April 21, 2023
Vape Tax Revenues for States a Fraction of Tabacco
Credit: Andrii Yalanskyi
The total tax revenue collected by U.S. states and local governments from the vaping sector remains only a fraction of that extracted from traditional tobacco products, according to a new report published by KBRA.
Vaping devices have gained popularity in recent years, largely due to health concerns around traditional cigarettes, smoking cessation initiatives and rising youth consumption.
U.S. product sales for e-cigarettes are estimated at $7.4 billion annually. Capitalizing on this trend, many states and local governments have implemented taxes on these tobacco alternatives. Cigarettes have an estimated market volume of $82.67 billion in 2023, according to Statista.
Despite high expectations, the total tax revenue from these products remains small relative to tobacco taxes—and even smaller as a percentage of the budget.
The KBRA report provides an overview of the e-cigarette/vape market, examines different forms of taxation by state, and assesses the limitations of these taxes in bolstering state budgets, as well as the possibility for future federal regulation.
Key findings of the report include:
While the number of states that have implemented e-cigarette and vape device taxes has grown, these tax revenues represent only a small fraction of the traditional cigarette market size. Vaping tax collections still contribute a negligible percentage of current governmental revenues for U.S. states.
Taxation methods vary among states and localities due to the uniqueness of vaping and tobacco alternative products.
While a vapor excise tax regime could provide additional sources of revenue for states and localities, there are concerns surrounding states relying on these revenues as long-term solutions to close their budget gaps.
Increased federal regulations on vapor products, as well as the implementation of a federal excise tax, are probable in the years to come, which could potentially curb usage and associated tax revenue collections at the state level.
The KBRA report provides an overview of the e-cigarette/vape market, examines different forms of taxation by state, and assesses the limitations of these taxes in bolstering state budgets, as well as the possibility for future federal regulation.
March 21, 2023
U.K. Chancellor Rejects Single-Use Vape Levy

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U.K. Chancellor Jeremy Hunt has rejected calls from health officials to introduce a new levy on single use vapes in the government budget due to be presented on March 15, reports the news outlet I.
The Department of Health and Social Care has been pushing for the new tax to crack down on underage vaping. The proposals are expected to be included in the government’s response to the Khan Review on smoking, but treasury sources told I that the new levy will not be included in the March 15 budget.
“Department of Health officials are keen, but it’s not going to happen,” a source told I.
Anti-smoking activists too have been urging the government to start taxing disposable vapes. “Increasing the tax on single use disposable vapes in the March budget would be easy to do and by making them less affordable could reduce both child vaping and the vast quantities of single use vapes being thrown into landfill,” AHC CEO Deborah Arnott was quoted as saying.
“Adult smokers find vaping useful in helping them quit, and that’s something we support. However, in the light of the recent increase in child vaping, government action is urgently needed to tighten regulation and increase enforcement,” Arnott added.
U.K. ministers are reportedly contemplating a range of measures to discourage underage vaping. Among the plans under consideration are a ban on candy-flavored vaping liquids and a crackdown on colorful marketing that could appeal to youth.
Britain bans sales of vapes to anyone below the age of 18, but national surveys have shown an increasing trend of 11-17 year olds using the devices, with health leaders blaming the rise on the marketing and flavors associated with them.
March 8, 2023