BLOG #5 FEDERAL EXCISE TAX
BLOG #5 – MORE TAXES INCOMING!
Our industry has evolved significantly over the past decade, as governments have begun introducing new laws and regulations on vaping products.
While we do not agree with the premise of taxing a harm reduction product, we are bound to obey the laws created around our products for the Canadian marketplace. The Federal Government’s misguided intention is to protect our youth and create more income for the government coffers, but they have consistently failed to recognize the substantial number of adult vapers who have quit or cut back on their smoking through vaping.
Recently the Canadian Federal Government has implemented an Excise Tax for products containing vaping substances.
The information in this post will help you understand this latest development.
When Where and How much?
An excise tax is a tax imposed on products imported to or produced in Canada.
On April 7, 2022, the Federal Government introduced an excise duty tax on vaping products. This tax applies to any products containing vaping liquid (e-liquid) with or without Nicotine.
All vaping substances sold in Canada are required to have an excise duty stamp as proof of taxes paid like the stamp on cigarettes or cannabis.
The duty is calculated based on liquid volume of vaping substance in a single container (mL).
- For the first 10mL of liquid, the duty is $1.00 per 2mL.
- For each additional 10mL of liquid, the duty is at the rate of $1.00 per 10mL.
This Federal Tax will be implemented at the manufacturer level on October 1st. From then until Dec 31st the stores will transition to the new pricing. After January 1st, our customers will experience it as a simple price increase.
All vaping products that contain E-liquid are subject to the excise tax.
- All E-Liquid
- All Pre-Filled Pods (STLTH, Z-Pods etc.)
- All Disposable Vapes
Why tax a harm reduction product?
Misinformation from health orgs, Government, and media. Unfortunately, Heart and Stroke, Lung Association, and Cancer Charities have bought into the narrative pushed by the anti-vape crowd that vaping is bad, even an epidemic. This is not scientifically based – in fact, the opposite is true – but these orgs have a loud voice and have been able to affect government policy to a large degree.
Effects of the tax
Like everything there are both good and bad outcomes from this Liberal Government tax grab.
The bad is obvious; vaping will cost the consumer more, while hurting small business. The tax also makes an unspoken statement that vaping costs society more than smoking, which is completely untrue. There is no credible research showing any significant harms from nicotine vaping worldwide.
The good is that a tax will work to legitimize our industry to some degree and since the government will be receiving hundreds of millions of dollars in taxes, perhaps they will leave us (and the roughly 1.2 million adult Canadians who have switched from smoking to vaping) alone.
Another benefit is that the requirements to enroll in the Federal Government tax program is expensive and complicated so it will make it difficult for the smaller and less professional manufacturers in the industry to participate in the market. It should weed out the weak or sketchy juice makers and will therefore provide a higher level of quality and consistency for the consumer.
Final word, my opinion
The government should not be doing this – there is extraordinarily little if any justification for taxing a harm reduction product. We do not tax Nicorette gum or the patch. We do not tax seatbelts or bicycle helmets. So why would we tax another product that reduces harm by helping people get off cigarettes that proven to kill you?
This Tax hurts the most vulnerable – some our highest smoking prevalence rates in the nation are with Indigenous, Immigrant, and LGBT communities who are also some of our lowest income earners. These are the groups who in many cases can least afford a tax hike and at the same time have the greatest need for an economical replacement nicotine delivery device.
It is still worth it to vape for the harm reduction and savings? – absolutely. As far as the cost goes, we estimate that the average vaper will still, even after the tax is implemented, be able to save at least 50% of the cost of smoking for a similar nicotine intake. And further, from a health standpoint, vaping still allows us to consume nicotine while eliminating all the deadly toxins found in combustible cigarettes.
From a business standpoint, we have decided to reduce our profit margins to “meet the customer half-way” on e-liquid products, as a way of mitigating the negative effects of this ill-conceived tax grab. The most important thing is that our customers who have used vaping to improve their life do not go back to smoking. So, you will see increaseing prices in the coming months, but we have committed to reducing the impact as much as possible at Inspired Vapor Company!