Opinion: Ottawa’s tobacco tax should reflect the various health risks associated with vaping


Juul branded vape cartridges on sale at a store in Atlanta on September 26, 2019.


In its budget statement, the federal government announced that it would introduce a special excise tax on vaping products in 2022. Currently, no such tax is imposed, although several provincial governments have introduces taxes on each milliliter sold (eg Nova Scotia) or special sales taxes (eg British Columbia).

Tobacco and nicotine are viewed by society as sinful goods. We loosely group them together with alcohol, cannabis, gambling, etc. We call them the goods of sin because they can be harmful to our health if consumed in excess and sometimes if only consumed in small amounts.

Vaping products are the most important component of what we now call Alternative Nicotine Delivery (ET) systems. Other ET systems come in the form of wet snuff made with tobacco and nicotine (small sachets that deliver nicotine when the sachet is placed in the mouth) and heated tobacco products (HTP). An HTP is a small “stick” of tobacco that is heated rather than burnt when placed in a special battery-powered device. Both delivery systems are already subject to federal excise levy. So it’s only natural that we start taxing vaping liquid.

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In a recent article published by the CD Howe InstituteI argue that the federal government should approach the ET tax issue holistically and be guided in particular by the health risks associated with each product in the AND category.

Most Canadians do not know exactly what is in tobacco which is responsible for the lion’s share of our health problems. Cigarettes contain nicotine which is addictive for most of its users. But it is combustion that is the real demon. Nicotine keeps the smoker coming back for more, but smoke is the danger due to the carcinogens and countless toxins it contains.

Technological developments in nicotine delivery mean that nicotine can be almost separated from toxins – but not completely. New products are not without risk and most of them have not been around long enough for us to observe how, for example, the health of lifelong vapers will evolve. In the absence of this information, the best we can do is analyze what the vaper is inhaling and exhaling. Public health England and the Royal College of Physicians estimate that electronic cigarettes contain no more than 5 percent of the toxins in a combustible cigarette.

Broadly similar toxicological findings characterize heated without burning (HNB) products and modern snuff pouches.

So how should public policy, and tax policy in particular, reflect this? To answer it, we have to ask ourselves what we are trying to achieve with an excise duty or a specific sales tax on e-liquids. At the very least, the sample should be informed by the relative health risks associated with vaping versus smoking. This implies a lower relative tax rate, which could encourage nicotine-dependent smokers to move away from heavily taxed cigarettes.

The same principle should apply to HNB and snuff products. These products are currently subject to excise duties which are in the same direction as cigarettes. These punitive rates not only deter smokers from straying from their traditional habit, but they also deter suppliers from investing heavily in switching their product line to fuels. Tax policy should recognize that tobacco companies earn income from highly toxic products (combustible cigarettes) and low risk products. If low risk products are taxed at the same rate as fuels, the incentives for suppliers decrease.

Recent Statistics Canada surveys indicate that a small fraction of the population realizes that the health risks of electronic cigarettes are low compared to combustible cigarettes. There are huge gains to be reaped in terms of reduced morbidity and mortality from the shift from uninformed smokers to low-risk products. According to various estimates, the annual life associated with smoking is around 40,000 people. A lower cost to satisfy a craving for nicotine, combined with information about reduced toxicity, could make smokers switch to a lower risk product.

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The in-budget vaping proposal itself is prone to significant inequalities in that it proposes to tax products that provide the same amount of nicotine differently. It will have to be revised to avoid these inequalities.

But lower taxes AND lower taxes are only part of the answer to reducing smoking rates. Vaping has grown among young people, and our concern about it over the past two years has distracted our attention from the vast health gains to be made by encouraging smokers to change.

The biggest barrier to the productive use of ET systems is that young people experience them at a high rate. Nearly daily vaping rates for high school students are in the range of 6-7%. Estimates vary by survey and a higher vaporization fraction on an occasional basis.

If there is good news in these statistics, it is that the daily smoking rate among the same students is now down by about 2 percent. In contrast, parents of today’s teens had daily smoking rates close to 25% in the 90s. The toxins consumed by daily smoking parents consumed through combustible cigarettes in the 90s are certainly 50 times. more important than what is consumed daily by daily vapers.

Finally, it is important that the federal and provincial governments approach politics in the same way. Tobacco taxation is a shared competence. A risk-based approach to taxation at one level of government will only bring health benefits if the government, or governments, at the other level cooperate.

To conclude, ET systems taxation should reflect the risk and we need to maintain a large gap in the retail price of electronic cigarettes, HNB products, snuff on the one hand and fuels on the other. Highly addicted smokers should also be the subject of a concerted “quit or change” campaign. At the same time, we must rigorously put in place age-specific nicotine access controls at all points of sale.

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Ian Irvine is Professor at Concordia University and Associate Researcher at the CD Howe Institute.

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