Newfoundland announces the implementation of its Vape Products Tax

Hamilton, Ontario, CANADA


Beamsville, ON, Dec. 17, 2020 (GLOBE NEWSWIRE) -- On September 30, 2020, the Government of Newfoundland and Labrador announced plans to implement a tax on vapour products. Despite, the Canadian Vaping Association’s (CVA) repeated requests for further details on the implementation of the tax following the announcement, no clarification was provided. Yesterday, Newfoundland and Labrador posted the notice of implementation with January 1st as the effective date for new tax.

As written in the notice, both retailers and wholesalers are required to obtain a license to continue to sell vapour products. The license requirement extends to out of province wholesalers who intend to sell into the province. The Government of Newfoundland and Labrador has effectively given vape companies an unprecedented two week period to obtain a license, update their POS systems and modify invoicing procedures. It is unlikely given the break for the holidays that government will have the capacity to approve hundreds of license applications within this two week period. In addition to the lacking timeline for vendors to implement the new tax structure, the government has yet to contact any vape businesses directly to advise them of these new requirements.

The CVA again cautions government that taxing vapour products harms public health. The data has consistently shown in all regions that following the implementation of a vape product tax, traditional cigarette sales increase. A study conducted by Minnesota, “The impact of E-cig taxes on smoking rates: Evidence from Minnesota,” found that taxing vaping products would lead to an 8.1% increase in tobacco use and a smoking cessation decrease of 1.4%. It also found that if vapour products had not been taxed an additional 32,400 adults would have quit smoking.

Vapour products and traditional cigarette sales are closely tied as economic substitutes - if the cost of one increases, sales of the other will increase. Other data from the United States further demonstrates this. Researchers monitored the sales data of 35,000 retailers and found that for every 10% increase in e-cigarette prices, sales of vaping products dropped 26 percent. The higher tax on e-cigarettes resulted in an 11% increase in sales of traditional cigarettes.

If the Government of Newfoundland and Labradors intention is to use this tax to make vaping products cost prohibitive for youth, it will be ineffective. All studies have found that low cost disposable vaping products are the preference of youth. A 20% cost increase on these products will result in only a marginal cost increase, while significantly impacting the price of the non-disposable products preferred by adult smokers.

“We have shared the research with the Government of Newfoundland and Labrador, showing the harmful effects taxes have on smoking rates and public health. Should the province continue down this path, they must provide a reasonable timeline for vendors to implement the new tax. The industry has shown its commitment in meeting all regulatory requirements, but as it stands, the lack of communication on implementation will leave many vendors open to possible fines for failing to meet licensing deadlines,” said Darryl Tempest, Executive Director of the CVA.

The CVA calls on the Government of Newfoundland and Labrador to scrap the tax and work with industry to create a different framework to protect youth. Vape shops should be made age-restricted spaces, as they are in much of the country. By age-restricting specialty stores and limiting the sale of flavoured and high nicotine products to these stores, the province can balance youth protection with adult access to harm reduction products.

 

 

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