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This was the headline on the front page of the Times on the 3rd of March: "Brussels tax hike to send e-cigarette price soaring". So what might it mean for vapers?

The Times reported that:

"..ambassadors from all 28 EU countries have agreed to take the first steps towards imposing higher duty, quietly telling the European Commission to come up with plans by next year to reclassify e-cigarettes as tobacco products for tax purposes."

The article then goes on to explain that under the EU tax regime, the price of cigarettes includes a minimum of 57% duty with VAT added on top. Tobacco duty on cigarettes is made up of two elements, specific excise, which is a fixed amount currently of £3.78 per pack of 20, and 'ad valorum' which is 16.5% of the retail price of the pack, or the weight adjusted price (WAP) as the tax wonks like to call it. Member states are free to set their own rates for specific excise and ad valorem duty, however the total must be at least equal to 57% of the WAP. The 57% minimum rarely comes into play because countries set the specific excise and ad valorem rates higher than that anyway.

The important thing to remember about tobacco duty, is that it is expressed as a percentage of the WAP, and not an amount to be added to the net price of the product, so if the net price of a product is £10, it would be incorrect to say that the minimum excise due is £5.70, because £5.70 is only 30% of the total retail price, which would be £18.84 with VAT. In fact the total retail price would be £37.97 if this particular regime were to be adopted.

Pro EU groups have been quick to report that the EU commission has “absolutely no plans at this stage to introduce excise duty for e-cigarettes. Nor has there been any suggestion that e-cigarettes would be taxed at the same level as cigarettes.”. Well that's comforting, isn't it. Others have asserted that all the EU is doing is creating a new excise category for e-cigarettes, not creating a new tax. You have to wonder why they would bother creating a category if they do not intend to create a tax.

This is further explained by Ecigintelligence in their article here. :

[The commission's report] outlined market distortion caused by not taxing substitutes of tobacco, arguing that “excluding e-cigarettes from the scope of excisable products might have significant long term budgetary implications for Member States. Some Member States have begun to levy a national tax on these products. This might in time jeopardize the proper functioning of the internal market if other Member States decide to do likewise in an uncoordinated way which would result in differentiated treatment across the EU.”

Uncoordinated as in the current situation whereby a small number of countries apply extra tax to e-cigarettes and others don't perhaps?

Ecigintelligence conclude:

"This is a step toward a tax regime but not the introduction of one. It does look like such a regime will likely arrive, possibly as early as next year, but the decision still depends on the Commission’s findings.

Any tax has to be proportional, reduce the administrative burden on businesses and competent authorities, and simplify compliance requirements. The particular circumstances of small and medium enterprises (SMEs) are also required to be borne in mind."

With respect, whilst some may view this tax as inevitable, there is no justification for it. It will simply be viewed as a "sin tax" and will send the message that vaping is as bad for you as smoking. It stands a very good chance of reducing the incentive of smokers to switch to an alternative which is at least 95% safer. After all, isn't that the thinking behind tobacco tax? In the words of our trustee, Lorien Jollye, “There is something very unsettling about financially punishing people for giving up smoking”. Quite.

Any new tax regime must be agreed by all 28 member states. Once e-cigarettes are included in the directive, even if initially as a zero rated product, the stage is set for subsequent increases. Vapers all over the EU should contact their parliamentary representatives and let them know how they feel.