UK Considers New Tax on Vaping Products

UK new vaping tax proposals

The UK government is debating implementing a dedicated tax on vaping products in next week’s Budget announcement. Unlike combustible cigarettes, e-cigarettes currently only pay the standard 20% VAT rate. A vaping levy could raise around £500 million annually if set at a similar level to tobacco duties, which brought in £10.4 billion last year. However, opponents argue higher taxes would stifle smoking cessation efforts.

Concerns Over Youth Vaping and Accessibility

Ministers believe cheap vaping may increase adoption by non-smoking youth and low-income groups. The government’s “swap to stop” program provides smokers free vaping starter kits to quit cigarettes. While vaping is safer, officials want to deter uptake by those not already addicted to nicotine.

A new vaping duty would target the liquid nicotine content. Making vaping relatively pricier aims to limit experimentation while keeping e-cigarettes affordable compared to tobacco for hardened smokers. The NHS advocates vaping as a smoking cessation aid, albeit with risks.

UK Government to Propose First-Ever Vape Tax in March Budget

Fears of Fueling Illicit Trade

Industry associations argue tax hikes could spawn an uncontrolled black market for vaping products. Disposable models complicate tracking shipments across borders. As vaping was originally designed to disrupt the tobacco industry, excessive regulation threatens to incentivize the very illicit channels it hoped to displace.

There are also concerns that poorer and younger demographics could turn to counterfeit nicotine products if legal vaping becomes unaffordable. Younger generations exhibit higher price sensitivity for consumable goods.

Wider Crackdown on Vaping Underway

The potential new levy accompanies wider efforts to restrict vaping access. A UK-wide ban on disposable e-cigarettes takes effect in 2025, along with constraints on flavors and marketing. Fines for retailers selling to underage customers will also increase.

The government wants to strike a balance between smoking harm reduction for adults and limiting youth adoption. However, the risk remains that deterrence legislation goes too far and nudges users back towards traditional tobacco.

Matthew Ma