Vaping tax: battle over future of e-cigarettes looms

Mar 2, 2016

All the details on the EU's reported plan for a new levy that could see a huge jump in price

The rise of e-cigarettes, credited as being one of the primary methods by which people are now giving up smoking, could be curtailed by a huge tax increase as a result of a change in European law.

What is happening?

According to reports in both The Times and the Daily Mail, European Union finance ministers are to approve a proposal that could see e-cigarettes reclassified as tobacco products for tax purposes. This would cause a huge price increase.

What is the background?

In December, the European Commission proposed extending the tobacco excise regime to cover "vaping" devices, which led to the European Council last week agreeing to "create a category for e-cigarettes" in the rules. 

These plans could be approved by finance ministers as soon as Tuesday and probably no later than 8 March. 

What would be the effect?

At the moment, 57 per cent of the retail price of tobacco products has to be taken up in duties. VAT on top creates a total tax burden of 77 per cent. E-cigarettes currently only have to include VAT.

"Many smokers who have turned to vaping say that their spending has halved," says The Times. "A levy could wipe out this saving." As the council has proposed creating a separate category, however, the tax hike might not match the more onerous levies on cigarettes.

Why is the EU considering a tax hike at all?

The commission said it was an attempt to offset "long-term budgetary implications for member states" due to the reduced rates of smoking. The council also cited the need to harmonise the rules to "reduce legal uncertainty… [and] hamper substitution by borderline products".

So it's not that they think vaping is bad?

General health concerns about vaping are certainly not the driving force of the proposal, no. The jury is still out on that. Public Health England would like e-cigarettes offered on the NHS, as they are estimated to be 95 per cent less harmful than smoking and effective at encouraging people to quit, but other medical professionals say the evidence base is weak.

"A study published yesterday found that 891,000 smokers used an e-cigarette, and not a prescription medicine or behavioural support, in a bid to quit," notes the Mail. That's prompting the likes of stop smoking campaign group Ash to lobby against the tax change.

What happens now?

"The plans will go to public consultation, setting up a lobbying battle," says The Times. A previous legal change that comes into force in May was branded "the most lobbied dossier in the history of the EU”, with pharmaceutical companies that produce other anti-smoking aids on one side and the tobacco giants on the other.

There's another legal change?

Yes. Under the incoming Tobacco Products Directive, "e-cigarettes not licensed as stop-smoking medicines will be limited in size and strength, with advertising banned".

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