With the draft measure first released last February by the German Finance Ministry, the law which will go July 1st, 2022, will have updated tobacco taxes for the first time in a decade.

Sadly the amendment will result in safer alternatives being taxed in the same way as regular tobacco products. Starting in 2022 and carrying on to 2023, nicotine-containing products will be taxed at 0.02 euros per milligram of nicotine alkaloids, and this will be raised to 0.04 euros per milligram in 2024.

The tax will increase taxes on regular cigarettes only moderately

“Due to the considerable tax burden on, for example, liquids, a black market for tax avoidance will inevitably develop.”
This means that the measure will greatly increase taxes on vaping liquids, tripling their price, while only moderately increasing taxes on regular cigarettes. Director of the World Vapers’ Alliance (WVA), Michael Landl said that ultimately these taxes will have the opposite effect than the one desired.

“The government says that these taxes will improve public health, but the reality is the exact opposite. As a less harmful alternative, vaping must be more affordable than smoking, to encourage smokers to quit. If Governments want to reduce the burden of smoking on public health, they must make vaping more affordable and more accessible, not less”.

Moreover, the Liberal and Green opposition parties, and the German Police Union have pointed out that this high tax will just provide a “start-up for smugglers and counterfeiters”, and the German customs union, BDZ, said that the tax will just feed a black market. “Due to the considerable tax burden on, for example, liquids, a black market for tax avoidance will inevitably develop.”

Raising taxes on safer alternatives increases smoking rates

In line with these arguments and findings from countless studies, recent research funded by the National Institutes of Health in the US, has indicated that indeed raising taxes on e-cigarettes in an attempt to curb vaping is counterproductive. The study found that such taxes only lead to former smokers reverting back to traditional (and more harmful) cigarettes.

Titled, “The Effects of E-Cigarette Taxes on E-Cigarette Prices and Tobacco Product Sales: Evidence from Retail Panel Data,” the study aimed to examine the effect of e-cigarette taxes enacted in eight US states. Using data from 35,000 national retailers between 2011 and 2017, the researchers found that for every 10% increase in e-cigarette prices, e-cigarette sales dropped by 26%. However, the same 10% increase in e-cigarette prices caused an 11% increase in traditional cigarette sales.

“We estimate that for every e-cigarette pod no longer purchased as a result of an e-cigarette tax, 6.2 extra packs of cigarettes are purchased instead,” said concerned study co-author and economist from Georgia State University Michael Pesko.

Economic Research: High E-Cig Taxes Lead to Increased Smoking Rates

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