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Italy’s Over-Taxation of E-Liquid, or How to Vaporize 160 Million Euros in Tax Revenue

In 2013, when the Italian Parliament voted to raise the price of e-liquid by a whopping 150%, by introducing steep taxes, authorities estimated an increase of 85 million euros per year in tax revenue. They were wrong.

e-cigarette-dataAccording to Ignazio Abrignani, an Italian deputy and member of the parliamentary intergroup “electronic cigarettes”, of the originally predicted 85 million euros, only 5 million in e-liquid taxes entered state coffers, in 2015, and the same is expected to happen this year. That’s a 160 million euro budget hole for the last two years.

“The excise duty introduced in 2013 has managed to depress a growing market,” Abrignani told L’Espresso, adding that “the increase in e-liquid prices has generated a strong demand for foreign products which, in the absence of controls tax, has done serious damage to Italian companies that respect the law. “

The deputy also expressed concern for the safety of vapers who have been driven to mixing their own e-liquids by the high prices of commercially available juices. Without proper knowledge mixing and inhaling DIY nicotine-containing e-liquid can have tragic consequences.

Once the third largest electronic cigarette market in the world, Italy has been hell for both vapers and e-cigarette businesses in recent years, after the state decided to introduce massive taxes to fill its empty coffers, following the recession of 2007-2009. The results have been disastrous – hundreds of small businesses closed, losses in potential budget revenue and , worst of all, an increase in tobacco cigarette sales.

All these unfortunate consequences have led some Italian vapers to believe that the disaster was premeditated by the state. By imposing shamelessly high taxes on e-cigarettes and e-liquids, they just wanted to push vapers back to smoking tobacco, a much more reliable and easily controllable source of revenue.

If that was indeed the case, their efforts were partly successful, but their only mistake was thinking that vapers were just as helpless as tobacco smokers. When the state raises cigarette prices, smokers have only two options – quit, or pay the higher price. But many Italian vapers turned to foreign markets as soon as the higher taxes on e-liquid was announced, as cross-border trade of vaping goods is still legal in the European country.

But seeing the effect high taxes on vaping supplies have had in countries like Italy, the sound question legislators around the world have to ask themselves is “are these taxes really necessary?” David Sweanor , a law professor at the University of Ottawa, public health expert and speaker at the Global Forum on Nicotine, doesn’t think so.

This is not the time to tax electronic cigarettes,” Sweanor said recently. “People respond to prices, and taxations that put cigarettes in disadvantaged market position compared to electronic cigarettes help push smokers to vaping.” As Italy’s vaping-focused Sigma Magazine notes, states interested in the good health of their citizens should tax tobacco aggressively and leave vaping goods subjectable only to VAT, at least until an even less harmful alternative is invented, if that ever happens. Unfortunately that is not the direction in which things are moving right now.

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