New taxes on vaping products, tobacco proposed in federal budget

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TORONTO — It will get more expensive for Canadians who smoke cigarettes and vape, under proposals outlined in the 2021 federal budget to further tax tobacco and vaping products, such as e-cigarettes.

Budget 2021 announces the federal government’s intention to introduce a “new taxation framework” to impose excise duties on vaping products that would start in 2022 if the budget is passed. An excise duty, also knows as a sin tax, is a tax charged on goods such as tobacco products, wine, and beer.

The budget document notes that, in addition to raising revenues, the duty could become an “effective means to help curtail harmful consumption of these products.” The government points to a Health Canada survey showing use of products like e-cigarettes has doubled since 2018 among Canadian high school students.

“Vaping with nicotine poses risks, especially to young people,” the budget document says. “Nicotine is highly addictive, can affect memory and concentration, and is known to alter brain development in teens.”

The new duty would apply to vaping liquids made in Canada or imported, that are intended for use in a vaping device in Canada. The duty applies whether or not the liquids contain nicotine. Cannabis-based vaping products are exempt as they’re already subjected to cannabis excise duties.

The framework would impose a single flat rate duty on every 10 ml of vaping liquid, or fraction thereof, within a container.

TOBACCO TAX

The government is also proposing to increase the tax on tobacco products, by $4 per carton of 200 cigarettes. It’s estimated this tax would boost federal revenues by more than $2.1 billion over five years.

Citing Statistics Canada and Public Health Agency of Canada data, the document outlines the average daily smoker spent about $3,150 on cigarettes in 2020. The new measure would increase the amount of excise duty embedded in the price of cigarettes by about $100 a year.

“There is higher than average consumption of tobacco products among a range of demographic groups,” says the budget document, adding: “This may have the effect of disincenting tobacco consumption, which may benefit smokers who are able to reduce consumption.”

Starting in 2021-2022, taxation of tobacco would bring in $415,000,000 of revenue for the federal government.  In 2022-2023, it would increase to $440,000,000. By the end of fiscal year 2025-2026, it would total $2,135,000,000 in revenue over five years.

Findings of the latest Health Canada survey on tobacco, alcohol and drugs showed:

·        34% of students in grades 7-12 have tried a vaping product and 20% of reported using them within the past 30 days

·        18% have tried an e-cigarette with nicotine and 11% had used an e-cigarette without nicotine in the past 30 days

·        54% of students thought it would be “fairly easy” or “very easy” to get an e-cigarette with nicotine if they wanted one

·        Most students who had tried vaping had also tried a tobacco cigarette