Category: Taxation

  • Germany Passes Bill to Raise Vapor, HnB Taxes

    Germany Passes Bill to Raise Vapor, HnB Taxes

    Vapers and cigarette smokers alike will be paying more for those products after the German Bundestag signed off on a bill to raise taxes on combustible cigarettes, e-cigarettes and heat-not-burn (HnB) tobacco products.

    Credit: Craig

    On Friday morning, the Bundestag waved through legislation to make vaping in Germany more expensive as of next year. Legislators are coming down hard on e-cigarettes HnB products which were previously only lightly taxed. That will change in the future, as the government moves to tax even nicotine-free varieties of e-cigarettes.

    Currently, a 10-millilitre bottle of vape liquid costs around 5 euros in Germany. In 2022, an extra 1.60 euros will be added to this price in taxation, and this will rise to 3.20 euros by 2026. An additional tax is also to be introduced for HnB products so that those products will be treated similarly to cigarettes for tax purposes.

    The new law has been met with dismay by the manufacturers of vaping products who argue that their products contain significantly fewer harmful substances than tobacco cigarettes and should therefore not be subject to the same levels of taxation. The Association of the E-Cigarette Trade (VdeH) warned that the move might prompt vapers to revert to smoking tobacco cigarettes.

    The so-called “Alliance for Tobacco-Free Enjoyment” – a representative body for the e-cigarette industry – said that it intends to go to the Federal Constitutional Court to file a complaint against what it sees as a disproportionate tax increase.

    Also, the combustible tobacco tax on a packet of 20 cigarettes will rise by an average of 10 cents in 2021. A year later, a further 10 cents will be added, and in both 2025 and 2026 another 15 cents per pack will be added.

    Around one in four adults in Germany smokes regularly, meaning that the tobacco tax is a big source of revenue for the government. Last year, it swelled the government’s coffers to the tune of approximately 14.7 billion euros. The last time the tobacco tax was increased was in 2015.

  • Indiana Governor Signs Budget Bill With New Vapor Taxes

    Indiana Governor Signs Budget Bill With New Vapor Taxes

    Indiana’s $44 billion budget for fiscal years 2022 and 2023, signed by the governor, contains new taxes on electronic cigarettes. Gov. Eric Holcomb signed H.B. 1001 Thursday. The bill adopts new taxes on open and closed cartridges of e-cigarettes. The tax is 25 percent wholesale on closed systems like vaping pods and 15 percent retail on open systems like refillables.

    Credit: DedMitay

    The Senate had originally planned on a flat 10 percent tax at retailers, but that was highly criticized as being too low, according to WTHR.com .

    “We are very pleased that the state legislature has recognized the importance of implementing a meaningful tax on vaping and e-liquids. We pushed back on the original Senate amount because it was not nearly enough to have an effect on discouraging Hoosier youth from taking up vaping, which too frequently leads to cigarette smoking for this group,” said Kevin Brinegar, president and CEO Indiana Chamber of Commerce. “Ultimately, Senate leadership recognized this as well and, working with House leaders, has put forth a strong tax system on vaping and e-liquids. Now, all of those products will be taxed on par with traditional tobacco ones, as they should be.”

    The Senate rejected a 50-cents-per-pack increase in the state’s cigarette tax. The state’s 99.5-cents-per-pack rate was last raised in 2007. A group of health industry and other business representatives had been pushing for a $2-per-pack increase to tamper down on the state’s 21.1 percent smoking rate for adults.

    “While the Indiana Chamber is still disappointed that there was very little interest in raising the cigarette tax this session, imposing the state’s first vaping and e-cigarette tax is a big step and will positively impact the health of many young Hoosiers in particular,” Brinegar said.

  • Federal E-Cigarette Tax Bill Introduced in U.S. Senate

    Federal E-Cigarette Tax Bill Introduced in U.S. Senate

    A new bill that would establish a federal tax on vaping products has been introduced in the U.S. Senate. Senate Majority Whip Dick Durbin, Senate Finance Committee Chair Ron Wyden (D-OR), Representative Raja Krishnamoorthi (IL-D-08) and seven other Senate Democrats have introduced the bicameral Tobacco Tax Equity Act of 2021, which would also increase the traditional tobacco tax rate for the first time in a decade.

    Credit: Steve Buissine

    “Tobacco-related disease accounts for one out of every five deaths in America, and I know that story firsthand,” said Durbin, according to CStoreDecisions. “Data shows that the most effective strategy to prevent children from starting this deadly habit is to price it out of their range. This bill would help reduce tobacco and e-cigarette use by ending loopholes that the industry has exploited to target our children. If America can kick its nicotine addiction it would go a long way to improving our public health for generations to come.”

    Joining Durbin and Wyden in introducing the bill in the Senate includes U.S. Senators Patty Murray (D-WA), Sherrod Brown (D-OH), Jack Reed (D-RI), Jeff Merkley (D-OR), Richard Blumenthal (D-CT), Ed Markey (D-MA), and Mazie Hirono (D-HI).

    The Tobacco Tax Equity Act of 2021 aims to “close tax code loopholes for tobacco products by increasing the federal tax rate on cigarettes, pegging it to inflation to ensure it remains an effective public health tool, and setting the federal tax rate for all other tobacco products at this same level.”

    “Loopholes in our tax code continue to favor big tobacco while the American public, especially our youth, pays the price,” said Krishnamoorthi. “The Tobacco Tax Equity Act increases taxes on cigarettes and finally imposes taxes on the e-cigarettes hooking our children on nicotine, which would generate billions of dollars in federal revenue. As a father of a high schooler and middle schooler, I’m determined to make sure we end the youth nicotine and vaping epidemic.”

    The Tobacco Tax Equity Act of 2021 is endorsed by the Campaign for Tobacco-Free Kids, American Academy of Pediatrics American Lung Association, American Heart Association, American Cancer Society Cancer Action Network, American Public Health Association, National Association of County and City Health Officials, Trust for America’s Health and American Thoracic Society.

  • VITA: Vape Tax Will Boost Black Market, Harm Youth

    VITA: Vape Tax Will Boost Black Market, Harm Youth

    The Canadian federal government tabled its annual budget yesterday and the legislation includes lawmaker’s intention to introduce a new excise tax framework in 2022. The Vaping Industry Trade Association (VITA) says the excise tax, when combined with a 70 percent reduction in maximum nicotine content and anticipated flavor restrictions, will create a once in a lifetime opportunity for the illicit market to grow and increase access points for youth.

    “Taxation of vaping products in a way that is proportionate to the harm reduction value of vaping is not something that the industry is fundamentally opposed to. Indeed, if revenues are used to increase enforcement actions against anyone selling vaping products to minors, there could be significant support from our sector”, said Allan Rewak, VITA’s executive director. “What we are concerned about is that this tax, when combined with broad flavor bans and restrictive nicotine caps will make the legal and highly regulated vape market uncompetitive with a growing illegal one.”

    According to a press release, VITA claims that vaping products are for adult smokers seeking to reduce their risk, “not nonsmokers and never youth.” Evidence has shown consistently that effective vaping products are one of the best means to transition heavy smokers away from cigarettes.

    “The Illicit market doesn’t care about reducing risk for adult smokers, they don’t care about age gating or checking ID, and they don’t care about the quality and safety of the products they sell”, said Daniel David, VITA’s president. “I’m really concerned that this tax, when combined with flavor bans and unrealistic nicotine caps will create an opportunity for criminals to prey on our children while making it harder for those of us trying to help adult smokers reduce their risk to stay in business.”

    The release also states that VITA believes that the government should utilize all revenue generated from this new taxation regime to empower increased enforcement action against anyone selling vape products to minors, while also reconsidering actions that would reduce the effectiveness of vaping products for adult smokers.

  • Vape Group to Protest German E-Liquid Tax Plans

    Vape Group to Protest German E-Liquid Tax Plans

    Photo: Nikolaus Bader from Pixabay

    Germany planned e-cigarette tax is a health policy disaster that will destroy jobs and boost black market sales without generating significant additional revenues, according to the country’s e-cigarette Trade association VdeH.

    Under the plans, e-liquids will attract a tax of €4 per 10 mL bottle from July 1, 2022. On Jan. 1, 2024, the tax will increase to €8 plus VAT, i.e. €9.52 per 10 mL bottle. Based on an average sales price of about €5 per bottle, this amounts to a tripling of the retail price, says VdeH.

    On April 21, the VdeH plans to protest the plans by projecting statements from scientists and consumers supporting its position on a 20 x 35 meter “hydro shield” at the Reichstag waterfront in Berlin.

    “The planned excessive taxation means that the 95 percent less harmful e-cigarette will soon be more expensive than conventional cigarettes,” says Michal Dobrajc, managing chairman of the VdeH in a press note. “With 11 million smokers still in Germany, the e-cigarette is the greatest health policy opportunity we have–we must use it. The planned tax would have exactly the opposite effect.”

    The tax plans, which fail to consider the expected market slump of 50 percent when calculating tax revenue, would take the level of vapor product taxation in Germany to five times the EU average, according to the VdeH.

    The law would not only shift consumption back to more harmful tobacco cigarettes, but also sacrifice the entire industry to the black market, the trade group cautions.

  • Estonia Suspends E-Liquid Taxation to Curb Black Market

    Estonia Suspends E-Liquid Taxation to Curb Black Market

    Photo: Makalu from Pixabay

    Estonia’s parliament recently voted to suspend the nation’s excise tax on e-liquid between April 1, 2021, and Dec. 31, 2022, to reduce cross-border and illicit trade. The Estonian excise duty on e-liquid has been €0.2 ($0.24) per milliliter since 2018. The Baltic state first considered making the move in 2020.

    “Suspending the collection of excise duty will make it possible to lower the price of e-liquids and thus offer consumers controlled and safe products at a lower price,” said Tarmo Kruusimae, parliament member and chairman of the parliament’s Smoke Free Estonia Support Group.

    “It has the potential to become a success story if we manage to reduce both the illicit trade and cross-border trade and at the same time offer less harmful alternatives to cigarettes at a more competitive price.”

    The group estimates that about 62–80 percent of the Estonian e-liquid market comprises self-mixed, cross-border and smuggled e-liquids primarily from Latvia and Russia. The e-liquid black market strengthened in 2019 when Estonia implemented a tobacco and vapor product flavor ban.

    Tobacco harm reduction advocates welcomed Estonia’s decision. “Estonia’s example with over-taxation of e-liquids should definitely be an educational experience for other countries,” said Ingmar Kurg, CEO of NNA Smoke Free Estonia and a member of the International Network of Nicotine Consumer Organizations, in a statement.

    “If laboratory-tested and legal products are made too expensive for consumers, they will look for solutions in the black market, self-mixing and cross-border trade. Some people give up e-cigarettes and return to smoking, which happened in Estonia.”

  • Alaska Legislators try Again to Tax Vapor Same as Tobacco

    Alaska Legislators try Again to Tax Vapor Same as Tobacco

    Legislators in the U.S. state of Alaska are trying again this year to tax “electronic smoking products” the same as tobacco products. Bills to extend the state’s tobacco tax to electronic smoking products died last March as lawmakers rushed to close down the session amid the start of the pandemic. However, two lawmakers are trying again this year.

    alaska state house
    Credit: David Mark

    The bills, sponsored by Kodiak Sen. Gary Stevens and Juneau Rep. Sara Hannan, have each cleared their first committee and are both waiting for a hearing in their respective Finance Committee before either could move to the full body for a vote.

    Alaska has no statewide tax on vapor products, although the state taxes smokeless tobacco at 75 percent of wholesale. Cigarettes are taxed at $2 a pack. HB 110 would enact a 75 percent wholesale tax on e-liquids, vaping devices, and components (HB 110 is the House version of SB 45).

  • West Virginia Governor Wants 1000% Vapor Tax Increase

    West Virginia Governor Wants 1000% Vapor Tax Increase

    West Virginia Governor Jim Justice committed to phasing out the states income tax in his 2021 State of the State Address. His proposal, submitted days ago to the state legislature for review, includes a hike in the states e-cigarette tax from 7.5 cents per millimeter of e-liquid to 75 cents per milliliter.

    money
    Credit: Pasja1000

    Under the proposal, a 100 milliliter bottle would carry a tax of $75, a 1000 percent increase. The bill also increases the tax on combustible cigarettes by 80 cents per pack, bringing the total to $2 per 20 cigarettes.

    At 75 cents per ml, a standard 30ml bottle of e-liquid would carry a $22.50 tax, which is 12.5 percent higher than the proposed tax burden on a full carton of cigarettes (200 cigarettes) if taxed at $2 per pack.

    In a story for Filtermag.com, many West Virginia vapers, vape shop owners, and tobacco harm reduction advocates—is that many will return to smoking or resort to a dangerous black market to save money.

    “We won’t be able to stay in business,” said Cheryl Lockhart, the owner of Hazy Hollow Vapors in South Charleston, West Virginia. “Nobody is going to pay for that.” The tax on the bottle would be more than the cost of the bottle itself, and most of what Lockhart sells—she ballparked up to 90 percent—are 100 milliliter bottles of e-juice. “I don’t see any path around it,” she told Filter. “It’s just one more thing.”

    Another concern is that West Virginia vapers may turn to neighboring states such as Kentucky and Ohio to make e-liquid purchases and denying the state any tax dollars from vapor products. This is what happened when Massachusetts increased its vapor tax.

    “No other state has a one-size-fits all volume tax higher than 10 cents per milliliter, yet Governor Justice and his team concluded that 75 cents per milliliter is rational,” said Gregory Conley, the president of the American Vaping Association. “While they may see this tax hike as a ‘small’ part of their overall plan, this is going to anger a whole lot of voters and cause them to believe their elected officials would prefer they keep smoking cigarettes.”

  • Germany: Plans For Vapor Taxation a ‘Disaster’

    Germany: Plans For Vapor Taxation a ‘Disaster’

    Photo: Steve Buissinne from Pixabay

    Plans by Germany’s governing coalition to tax vapor products are a disaster for public health and the economy, according to the country’s e-cigarette trade association, VdeH. The move will make vapor products more expensive than combustible cigarettes, which are widely acknowledged to be considerably more harmful to health.

    Under the plans, e-liquids will attract a tax of €4 per 10 mL bottle from July 1, 2022. On Jan. 1, 2024, the tax will increase to €8 plus VAT, i.e. €9.52 per 10 mL bottle. Based on an average sales price of about €5 per bottle, this amounts to a tripling of the retail price, says VdeH.

    “These tax plans leave you stunned, and one initially suspects a calculation error,” said Michal Dobrajc, executive chairman of the VdeH, in a statement. Such a price increase, he added, could only have been passed with the intention to kill off vaping.

    While not opposing e-cigarette taxation as such, the VdeH said fiscal measures should weigh the risks of vaping against those of smoking. Based on what is known about those relative risks, the tax on vapor products should not exceed 5 percent of that on tobacco products, according to the association. The governing coalition’s plans amount to 75 percent of the tobacco tax in Germany.

    The VdeH urged the German government to heed the experience of other countries.

    A similar tax policy in Italy caused the vapor market to collapse even as tobacco sales increased. Tax collections shriveled and the black market thrived. The Italian government was eventually forced to reduce the tax burden on vapor products by 90 percent. Estonia and Hungary had comparable experiences.

    The biggest losers of the governing coalition’s plans, according to the VdeH, are former smokers who successfully quit their habit with the help of e-cigarettes and current smokers who will not attempt to switch under the new tax regime. A police union has already described the tax plans as a “startup for smugglers,” the association noted.

  • Germany to Tax Vapor Based on Amount of Nicotine

    Germany to Tax Vapor Based on Amount of Nicotine

    Photo: Theerapan Bhumirat | Dreamstime.com

    The German government has proposed a new tax for nicotine-containing vapor products, which would be effective in summer 2022.

    The new tax is “a response to current market developments.” It would include a tax of €0.02 ($0.02) per mg of nicotine for e-liquids, effective July 1, 2022. Beginning Jan. 1, 2024, the tax would double by the end of 2026.

    “This is appropriate for reasons of fair taxation since only nicotine-containing substances in e-cigarettes are to be regarded as substitutes for cigarettes,” the draft of the proposed Tobacco Tax Modernization Act states. Authorities are also justifying the decision based on the “existing risk potential” of vapor products compared to traditional tobacco products.

    “They are not harmless consumer products and can cause serious illnesses,” the draft bill states.

    Lawmakers expect the new tax to bring in €135 million in 2022 and up to €2.9 billion by 2026.

    The German Alliance for Tobacco-free Pleasure (BfTG) says the plan “makes no sense.”

    “The tax would make smoking cheaper than vaping and make e-liquids many times more expensive,” BfTG chairman Dustin Dahlmann told ECigIntelligence, warning that it could lead to a flourishing black market and a collapsing legal industry, such as in Italy and Estonia. The BfTG believes taxation should be left at the EU level.

    Currently, vapor products are not specially taxed. They are subject to the 19 percent value-added tax, however.

    A decision is expected by the end of 2021.