E-cigarette tax hampers Portuguese market growth

Portugal - Rick LigthelmPortugal’s taxation policy on e-cigarettes has kept the market relatively small – and its full impact has not yet been felt by vapers or companies in the sector, according to research from ECigIntelligence.

In ECigIntelligence’s Portugal market and regulatory update for May 2015, our analysts explain that usage figures may not have even hit six digits and that the value of the market is accordingly limited.

Further, the full impact of the Portuguese tax has not been realised, with vaper spending patterns still in flux. “[The tax] will of course push individual annual spend upward but might also reduce vaper numbers,” the ECigIntelligence analysts said.

On 1st January 2015, a Portuguese tax of €0.60 ($0.70) per millilitre came into effect for nicotine-containing e-liquids. This has already led to a curtailment of growth, with numerous vape shops closing through the end of 2014 and beginning of 2015.

It is theorised that consumers may start to look for ways around the tax – for example, by buying nicotine-free e-liquid and adding nicotine sourced from other channels. Alternatively, small-scale importation might take off, as 30ml or less can be imported for personal use. This potentially could give a boost to Spanish vape stores.

The full impact of the tax has not yet been realised as implementation has been slow due to logistical and IT problems. The situation has been further muddied by some companies keeping back money in anticipation of back taxes being imposed, while others bought in large amounts of stock before the tax came into effect on 1st January and are still selling that product.

What This Means: Portugal’s market remains underdeveloped and shows how regulation can have some unintended consequences. Perhaps ironically, one of the few beneficiaries may be Spanish vape stores receiving more orders from across the border, which will be welcome after their recent rough ride.

Read more about the impact of tax and other regulation on the Portuguese market in ECigintelligence’s in-depth special report.

Photo: Rick Ligthelm

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