E-cig taxation measures expected to proliferate

taxation - Austin KerrGovernments around the world are waking up to the potential of taxing e-cigarettes, according to a new report from ECigIntelligence.

Thus far, only Portugal, South Korea and two U.S. states – Minnesota and North Carolina – have successfully implemented e-cigarette taxation, although Italy is also in the process of implementing a new tax.

Most current proposed and implemented regimes take the form of either a percentage tax on the wholesale price of the product, or a flat-rate tax based on the volume of nicotine-containing liquid.

“We believe the concept of a flat-rate tax based on the volume of nicotine-containing liquid, as recently implemented in North Carolina and Portugal, represents a major step for the regulation of e-cigarettes given the relative ease with which such a tax can be imposed,” says Nick Wenbourne, director of ECigIntelligence’s regulatory analysis team and author of the report.

Italy, meanwhile, is “openly seeking to recover a proportion of lost tax revenues from declining tobacco sales,” Wenbourne says. “We believe this may be attractive to many jurisdictions.”

The fact that these taxes treat e-cigarettes as a separate category from conventional tobacco products is also significant, the report says, and could set a precedent that is followed by other regulatory efforts.

What This Means: As governments seek to replace falling revenues from taxes on conventional tobacco – caused by decreasing numbers of smokers – e-cigarettes represent a logical place to turn. We should expect to see many more e-cig tax proposals over the coming year.

For a detailed, in-depth look at e-cigarette taxation around the world, consult ECigIntelligence’s new report (available to Silver and Gold subscribers only).

– Freddie Dawson ECigIntelligence staff

Photo: Austin Kerr

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