Written By Joshua Bainbridge - Content Executive at JM Wholesale
As a vape business owner you are faced with an important policy decision that will affect the vaping industry and public health. The possibility of implementing new taxes on vaping products provokes debate, as the impacts could be far-reaching. Analysing this complex issue requires carefully weighing economic, social and health considerations. To make an informed decision, you must objectively examine the evidence on all sides. What will new taxes mean for business, government revenue and consumer behaviour? How could price increases affect vaping uptake versus smoking rates? This article explores the key arguments, empowering you to take a balanced view. The implications are significant, especially combined with the flavour ban which has been proposed (Learn more here!) and a thoughtful approach is needed when evaluating the potential risks and payoffs of vaping taxes. This discussion aims to provide an impartial look at the realities and trade-offs involved.
New Vaping Taxes Proposed: What You Need to Know
The potential new tax on vaping
The government is considering implementing a new tax on vaping products in the upcoming budget. Currently, vaping products are only subject to the standard rate of VAT. In contrast, tobacco products face an additional tobacco duty. The new vaping tax aims to address the price differential between vaping and tobacco products. The government believes the relatively low cost of vaping products increases their accessibility to young people and non-smokers.
How the new tax may work
According to reports, the new tax will apply to the liquid used in vaping devices, with higher tax rates for products containing more nicotine. The tax, combined with an increase in tobacco duty, could raise around £500 million annually. Several European countries already have taxes on e-cigarettes, and the European Commission plans to introduce an EU-wide minimum tax.
Industry and health concerns
The vaping industry argues a new tax would penalise smokers who have switched from tobacco to vaping. They claim it could reduce the accessibility of vaping for poorer communities with high smoking rates and fuel an illicit vaping market. However, health experts argue vaping is not harmless and taxes could discourage uptake, especially among non-smokers and young people. The government aims to balance health, economic and industry concerns in developing vaping policy.
The outlook
The new vaping tax proposal comes amid government plans to ban disposable vapes and restrict e-cigarette flavours and packaging to curb underage use. The government will likely introduce legislation on vaping regulations and any new tax before the next election. Retailers would have six months to comply with any new rules once confirmed. The upcoming budget will provide further details on the government's tax and spending plans for the next fiscal year.
The Pros and Cons of Imposing Additional on Vapes
Lowering Accessibility to Minors and Non-Smokers
Imposing taxes on vaping products could curb underage usage by increasing prices and reducing affordability. According to the Times, the proposed duty aims to levy higher taxes on products with higher nicotine content, which are more likely to be used by minors. This could discourage minors and non-smoker from initiating vaping and reduce health risks associated with nicotine addiction at a young age.
Increase in Government Revenue
The Treasury estimates that the proposed vaping tax, together with a rise in tobacco duty, could generate around £500 million annually. The tax revenue from tobacco products was £10.4 billion in 2022. A vaping tax could provide a new and growing source of revenue for the government to fund public services. However, critics argue this may lead to over-reliance on 'sin taxes' and disproportionately impact lower-income groups.
Promoting Smoking Cessation
While vaping is less harmful than smoking, it still carries health risks. The proposed tax aims to maintain a price differential between vapes and tobacco to continue encouraging smokers to quit. However, higher prices could deter some smokers from switching to vaping, undermining public health goals. The NHS 'swap to stop' scheme provides free vaping starter packs to help smokers quit, but may be less effective if vaping becomes less affordable.
How New Vaping Taxes Could Affect the UK: Analysing the Potential Impact
Reduced Tax Revenue From Tobacco Sales
The imposition of new taxes on vaping products may lead to reduced tax revenue from tobacco sales in the UK. As vaping provides a less harmful alternative for smokers looking to quit tobacco, higher costs associated with vaping could discourage smokers from making the switch and continuing to purchase tobacco products, a major source of tax revenue. According to extracts from government analysis, tobacco duty currently raises £10.4bn per year in the UK. By making vaping less accessible through new taxes, the government risks losing out on a portion of this revenue as more smokers remain with or return to tobacco.
Growth of Illicit Vaping Product Market
New vaping taxes also run the risk of fuelling the illicit market for vaping products which are already “out of control” and difficult to regulate, as noted by the director general of the UK Vaping Industry Association. When legal vaping products become more expensive due to higher taxes, consumers may turn to cheaper, illicit alternatives to avoid the new costs. The proliferation of unregulated, illicit vaping products poses health risks to consumers and loss of revenue to legal businesses and the government.
Disproportionate Impact on Low-Income Smokers
While the goal of new vaping taxes may be to reduce vaping among youth and non-smokers, these taxes are likely to disproportionately impact low-income adult smokers seeking to quit tobacco. As taxes increase the cost of vaping products, they become less accessible as an alternative for smokers in poorer areas with higher smoking rates. Instead of quitting smoking altogether, these individuals may continue using tobacco or turn to illicit vaping products, neither of which achieves the public health goals of the new taxes.
The potential effects of imposing new taxes on vaping products are complex with both benefits and drawbacks to consider regarding public health, government revenue and the economy. A balanced, evidence-based policy is needed to effectively regulate vaping in a way that reduces harm while still supporting smokers seeking to quit tobacco. Additional research on how vaping taxes have impacted other countries may provide useful insights for UK policymakers in determining the best approach.