Excise Tax Burden: Electronic… | Campaign for Tobacco-Free Kids
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At a time when many countries are seeing declines in tobacco use, electronic nicotine delivery systems and electronic non-nicotine delivery systems (ENDS/ENNDS or e-cigarettes) are attracting a new generation of users, undermining progress to reduce tobacco consumption. Despite the long-term health effects being unclear, evidence demonstrates that ENDS/ENNDS use is not harmless nor without risks, particularly among never smokers and youth. Non-smokers using ENDS are 3 times more likely to go on to smoke conventional cigarettes compared to non-ENDS users1.

Among youth in the US aged 12–15, use of ENDS as one’s first tobacco product was associated with more than 4 times the odds of ever cigarette use and nearly 3 times the odds of current cigarette use2. Further, there is limited evidence to suggest that these products are effective smoking cessation aids1. In fact, ENDS tend to be used in combination with conventional tobacco products like cigarettes (dual use), and smokers using ENDS as a cessation aid are more likely to prolong their exposure to nicotine and increase their individual risk, compared to other methods of cessation1, 3, 4. Given the potential public health harms posed by these products, governments should adopt fiscal policies that tax all ENDS/ENNDS components, as part of a comprehensive tobacco control approach.

The Campaign for Tobacco-Free Kids developed this interactive tool to help technical experts, researchers, policymakers, and advocates compare the excise tax burdens of ENDS/ENNDS products in 54 countries across the world (2023). These maps illustrate how differences in taxation impact excise and total tax burdens. For more in-depth information, please see our ENDS/ENNDS Taxation Policy Brief.

Use the map to compare the excise and total tax burdens on ENDS/ENNDS by country. Excise taxes on ENDS/ENNDS products should be high enough to discourage initiation and use among never smokers and youth. For information on how excise and total tax burdens are derived, see Methodology. Visit the glossary for more detailed definitions of the terms used in this map.

The maps and corresponding data are current as of 2023. Please note that these maps only account for taxation of e-liquids. They do not necessarily reflect taxation of ENDS/ENNDS devices. For more information about a country’s current tobacco tax system, as it pertains to ENDS/ENNDS, please click the “All Data” tab and see our ENDS/ENNDS Taxation Policy Brief.

METHODOLOGY

Calculating prices in all countries:

The excise tax burden is defined as the ratio of excise taxes to price/mL of e-liquid. The total tax burden is the ratio of all taxes to price/mL and includes excise taxes, other sales tax such as retail sale tax, value-added tax (VAT), and/or import taxes. Both the excise tax burden and total tax burden are calculated for 54 countries that we have obtained price information for.

Price information was obtained from two sources: the WHO’s Global Report on the Tobacco Epidemic, 2021 (which corresponds to prices applied in 2020) and the E-Cigarettes Intelligence Unit (last information available as of Jan. 2023). When taxes have been updated prior to 2023, we assume that the change in the excise tax rate is fully passed on to retail prices. When unable to obtain price data for 2023, we assume that nominal prices in previous years have increased with inflation, using the Consumer Price Index (CPI).

For example, assuming that:
The year for which we have the latest tax information is year t (generally t = 2023);

The latest year for which we have price information is 2 years prior to the year for which we have tax information (that is, t−2), then the price is calculated as Pt−2 per mL for that year.

Assuming that: The country has a pure specific tax rate that increased from Et−2 to Et−2 from year t−2 to year t; and

The inflation rates are it−2 and it−1 in the previous 2 years, respectively.

Then, we calculate the new price per mL of e-liquid, as of year t as:

Pt = Pt−2 * (1 + it−2) * (1 + it−1) + (Et − Et−2)

We convert prices to purchasing power parity ($PPP) values or USD values using $PPP conversion rates, or the USD exchange rates (year average) obtained from the International Monetary Fund’s International Financial Statistics database.

To simplify comparisons across countries, we include e-liquids sold with open systems and do not factor in device taxation.

To determine the excise tax burden of ENDS/ENNDS, we calculate the tax amount per mL of e-liquid in ENDS/ENNDS systems and convert the price of e-liquid to a price/mL.

Calculating the tax burden in countries that apply an ad valorem excise tax:

In countries that apply an ad valorem excise tax based on the value of e-liquids, CIF (cost, insurance, and freight), or the ex-factory cost, we assume that this cost represents about 20% of the retail sale price (RSP).

As a result, the tax burden of the excise tax is:

B = 20% * tax rate, where tax rate is the statutory ad valorem tax.

For countries in which the tax base for the ad valorem tax is the RSP inclusive of all taxes, the tax burden is the statutory tax rate (stated by the government).

As a result, the tax burden of the excise tax is:

B = 50% * (vi/(1+vi )), where vi is the statutory value-added tax (VAT) rate (inclusive of the VAT).

The total tax share includes all excise taxes, all retail taxes (e.g., VAT, general sales tax), and other duties (e.g., customs or import duties, surcharges).

Countries with an exception:

Canada: The tax announced in the 2022 budget is a tiered specific excise dependent on the volume of e-liquid. For comparability with other countries, we assume that a typical e-liquid unit contains at least 20 mL of e-liquid. The resulting tax is CAD 5 for the first 10 mL of e-liquid, plus CAD 1 for each mL following the first 10 mL. Thus, the tax per mL is a rate of CAD 6/20, or CAD 0.3 per mL.

China: Two taxes apply to 2 different tax bases representing different stages of production. One tax base is the “manufacturer price”, the other base is the “wholesale value”. Though for other countries we assume that the wholesale value represents 20% of the RSP, for China, the wholesale value includes a large production margin defined by the government as the “manufacturer allocation price”. We calculated the manufacturer allocation price prior to the introduction of the new tax in October 2022. The production margin represented is about 50% of the ex-factory or manufacturer value. The breakdown of tax and prices is shown in the table below. The first 3 columns represent the situation prior to the introduction of the excise tax (October 2022), and the last 3 columns represent the situation that applies under the new tax system (assuming full pass-through of taxes to prices).

PRE-REFORM (OCT 2022).POST-REFORM (Assumed)
Value in RMBStatutory rates (%)Share in priceValue in RMBStatutory rates (%)Share in price
Final Retail price3554.59
VAT4.0313.011.5%5.9813.011.0%
Retail price (exclusive of VAT)30.9746.03
Retainer (retail)00.0%-0.0%
E(Wa)0.0%4.5611%8.4%
E(Ma)0.0%10.9836%20.1%
E0.0%15.5428.46%
U0.4812%1.4%2.5812%4.7%
Total tax4.5112.9%24.1044.15%
Wholesale30.4987.1%41.4776.0%
Wholesale retainer-0.0%-0.0%
Manufacturer price30.4987.1%30.4955.8%
Manufacturer retainer10.1629.0%10.1618.6%
Ex-factory20.3358.1%20.3337.2%

NOTES:

The pre-tax price is calculated from an average of several brands of economy ENDS sold in Oct. 2022, at about RMB 35/cartridge. The calculation of the new price and tax burden is performed in the “post-reform” period, assuming that the new tax is fully passed on to price.

  • U= Urban Maintenance and Education Tax.
  • Wa= Wholesale value.
  • Ma= Manufacturer price (Manufacturer allocation price).
  • E=Total excise tax, sum of the wholesale and manufacturer taxes E(Wa) and E(Ma), respectively.
  • There is no retainer (retail margin) at the RSP of wholesale stage of production. Instead, we account for all production margins to be represented in the manufacturer allocation price.

Ecuador: The tax base is defined as “150% of the manufacturer’s selling price net the VAT and the excise itself (another charge), plus a minimum 30% trade margin”. In the case of imports, the ex-customs price replaces the net ex-factory price. Since in Ecuador, the VAT rate is 12% and the excise is 150%, we define the base (B) as about 27.5% of the retail price. That is:

B=1/((1+150%)*(1+30%)*(1+12%))

Ghana: We searched online stores for the cheapest brand of e-liquid sold in March 2023. Prices are generally based on the number of puffs. We use an equivalency ratio of 10mL = 3,000 puffs to calculate the specific tax per mL of e-liquids. Given that Ghana uses a mixed tax system with a specific tax based on volume (GHS/mL) and an ad valorem tax based on the ex-factory price, the total excise tax amount per container of 10 mL is:

Tax=GHS*30+GHS*20%*p

Where p is the price per 3,000 puffs of e-liquid (1 container). The resulting tax burden is:

Tax burden=tax/p= (GHS*30)/p*GHS*20%

GLOSSARY

Cost, insurance, and freight price (CIF)

CIF stands for the cost, insurance, and freight price of a good at the point of import. It does not include the cost of import duties or other taxes that may apply within the country.

Ex-Factory cost

The ex-factory cost refers to the selling price of goods from the manufacturer’s factory. It does not include other costs such as shipping, insurance, import duties, and other taxes that may apply.

Excise tax

Excise taxes are levied on particular goods, services, and activities. They can be either a per unit tax (such as per gallon of gasoline or per cigarette stick) or a percentage of price. Generally, excise taxes are embedded in the final price paid by consumers.

Ad valorem excise tax

Ad valorem excise taxes are a type of excise tax applied as a percent of the value of the commodity. Generally, the tax base for an ad valorem excise is determined at the producer level (“ex-factory price”) or wholesale level (“wholesale price”). However, it is recommended that an ad valorem excise apply to the retail sale price (RSP).
For example: 65% of the ex-factory price, or 20% of the RSP for an e-liquid cartridge.

Mixed excise tax

A mixed excise system employs both a specific and ad valorem excise tax.

Specific excise tax

Specific excise taxes are a type of excise levied as a fixed monetary amount per a given measure or quantity (e.g., units, weight, milliliters) of certain goods.
For example: a tax of $1 per 20 sticks of cigarettes, or a tax of $2 per mL of e-liquid.

Tiered excise tax

A tiered excise tax can be either ad valorem or specific. In a tiered excise system, different tax rates are applied, often based on characteristics of the product (nicotine vs. non-nicotine e-liquids, salt-base vs. free-base nicotine, price category, open system vs. closed system, etc.).

International Dollars ($PPP)

Reporting prices in International Dollars ($PPP) allows users to compare the price of tobacco products between countries. Each country reports data in its own currency. Therefore, to compare the prices of a given product or service, each country’s price statistics must be converted into a common currency to better reflect the purchasing power of the good for a typical consumer. To convert each country’s tobacco product prices into a common currency, we use the purchasing power parity ($PPP) conversion factor.

Retail sale price (RSP)

Retail sale price is the price at the point of sale to the consumer, inclusive of all mark-ups and taxes. In some countries or regions (e.g., European Union), it is also called the tax-included retail sale price (TIRSP).

Tax base

Tax base is a unit of measure describing the quantity of a certain good used to define a tax (e.g., volume, number of units, weight).
For example: The tax base for a specific excise tax of EUR 100/1000 cigarette sticks, is the number of units.

Tax burden

Tax burden is the ratio of the tax to the final RSP. It is expressed as a percentage of the final RSP. The WHO generally refers to two types of tax burdens: the excise tax burden and the total tax burden.

Excise tax burden

The excise tax burden is the ratio of the sum of excise taxes to the final RSP.
For example: An excise tax burden of 50% means that the sum of all excise taxes make up half of the final RSP.

Total tax burden

Total tax burden is the ratio of the sum of all sale taxes (inclusive of excise taxes, customs or import duties, VAT, and other sales taxes or surcharges) and the final RSP.

Value-Added tax (VAT)

A value-added tax is a type of consumption tax added to each stage of manufacture and distribution for a product.

  1. Australian National University. 2022. Summary Brief: Review of Global Evidence on the Health Effects of Electronic Cigarettes. Canberra, Australia: National Centre for Epidemiology and Population Health. Available from: https://nceph.anu.edu.au/research/projects/health-impacts-electronic-cigarettes
  2. Berry K.M., Fetterman J.L., Benjamin E.J., Bhatnagar A., Barrington-Trimis J.L., Leventhal A.M., Stokes A. Association of electronic cigarette use with subsequent initiation of tobacco cigarettes in US youths. JAMA Netw. Open. 2019;2(2):e187794. doi: 10.1001/jamanetworkopen.2018.7794
  3. National Academies of Sciences, Engineering, and Medicine (NASEM), Public Health Consequences of E-Cigarettes, Washington, DC: The National Academies Press, 2018, http://nationalacademies.org/hmd/Reports/2018/public-health-consequences-of-e-cigarettes.aspx
  4. Owusu D, Huang J, Weaver SR, et al. Patterns and trends of dual use of e-cigarettes and cigarettes among U.S. adults, 2015–2018. Preventive Medicine Reports. 2019;16:101009. doi: 10.1016/j.pmedr.2019.101009