Evaluation of Electronic Cigarettes Market Trends and Excise Duty

2020
Māris Jurušs, Zane Utināne

Excise duty covers also categories of tobacco products that are not harmonized throughout the European Union, such as the liquid used in electronic cigarettes - is not a taxable object in all Member States. The same refers to other modern alternative products, such as heated tobacco. Otherwise, it also creates differences between countries in terms and conditions of market research and traceability of this product. Liquid used in electronic cigarettes in Latvia has been a taxable object since July 1, 2016, while heated tobacco from March 1, 2016, with a starting rate of EUR 62 per 1000 grams of heated tobacco. Based on the prevalence indicators of liquid used in electronic cigarettes and heated tobacco and the analysis of the excise duty on this product, the authors points out that the tax revenue from this product is currently negligible compared to other categories of tobacco products. In addition, from 1 January 2020, the tax rate on other categories of tobacco products (other than cigarettes), which is a much more significant source of tax revenue, has already been raised. Experience in other countries shows that problems with the use of electronic cigarettes arise, because of consumers get their product in illicit market, including online, without any product quality controls, user age verification, thus creating a a tax gap. According to surveys, the goal of buying electronic cigarettes is mostly to quit smoking or to switch to a safer way to smoke. Many scientific studies conclude that nicotine intake without burning is a better alternative to cigarette smoking, while other studies indicate that the long-term effects of using electronic cigarettes are not yet measurable, so there is no unequivocal result for those who have proven the dangers of electronic cigarettes or those who have proven otherwise. The results of the study indicate that the consumption of electronic cigarettes is currently low enough not to take radical steps to increase additional taxes. This may not bring the expected fiscal benefits. Instead, it is necessary to improve the ability to conduct a more accurate and wider market analysis of this product, while fighting the looming illicit trade in internet. Existing health surveys could be used to this end, improving the methodology for developing these surveys to include questions that would help consumers identify their choice of electronic cigarette purchases - legal or illegal market, online tools or face-to-face.

Keywords
Akcīzes nodoklis, elektroniskās cigaretes, karsējamā tabaka, nodokļu ieņēmumi, nodokļu plaisa, nelegālais tirgus.
Hyperlink
https://drive.google.com/file/d/1xVyNs9mt96CwLF_sgGIssSwz7b_WasC-/view

Jurušs, M., Utināne, Z. Elektronisko cigarešu tirgus attīstības tendences un akcīzes nodokļa novērtējums. Rīga, 2020. 21 p. Available: https://drive.google.com/file/d/1xVyNs9mt96CwLF_sgGIssSwz7b_WasC-/view.

Publication language
Latvian (lv)