The Harmful Impact of Sin Taxes on E-Cigarettes in Quebec

Dec.15.2022
The Harmful Impact of Sin Taxes on E-Cigarettes in Quebec
Quebec's smoking population is decreasing, with e-cigarettes proving more effective than traditional methods. Taxing e-cigarettes may increase risks and harm small businesses.

Smoke-free Quebec has always been our common goal. The smoking population in Quebec continues to decline, reducing the risk of serious illness caused by combustible tobacco for Quebecers. The Canadian Vaping Association opposes nationwide taxation on e-cigarette products, as this would have unintended consequences and increase risks for young people. E-cigarettes are an effective harm reduction product with a quit rate twice that of patches and gum. This innovative product has contributed to Quebec's economic growth. Tobacco control requires viable solutions, such as using e-cigarettes to help adult smokers quit. Increasing the cost of e-cigarette products, like traditional cigarettes, will not help the country achieve its goal of a smoke-free future.


Electronic cigarettes have the potential to help almost 1.3 million Quebec residents who currently smoke by providing them with a less harmful alternative to combustible tobacco. These products are subject to both provincial and federal regulations, which prohibit sales to minors, require ID for those under 25, feature warning labels about nicotine addiction on their packaging, and limit the use of certain texts and graphics. Candy, soft drink, and cartoon character imagery are prohibited from being used in marketing materials. In Quebec, e-cigarette products come from reliable sources and are subject to rules that are often stricter than those governing other legal substances. The strong regulations implemented by Canada to protect youth will be undermined by the emergence of a large illicit market resulting from punitive taxes.


Throughout the implementation of the federal consumption tax, the Canadian Vaping Association has issued a warning to the federal government that harsh taxation will lead to an increase in smoking, a large illegal market, and weakened protection for young people. With Quebec announcing its intention to join the consumption tax system, Quebecers will be paying nearly double the tax rate. Certain categories of e-cigarette products will become more expensive than traditional cigarettes. The introduction of an e-cigarette tax is meant to achieve health goals, particularly to prevent young people from using e-cigarettes. Levying provincial consumption tax on harm reduction products has a negative impact on Canada's tobacco control strategy, which is aimed at helping Canadians who smoke quit or reduce the harm caused by nicotine addiction.


The Canadian Ministry of Health recently reviewed the Tobacco and Vaping Products Act (TVPA) and suggested that more ongoing public education and awareness efforts should be made to inform young people and non-tobacco users about the health risks associated with vaping. Additionally, the majority of adult smokers are unaware that vaping is less harmful than smoking tobacco products. The ministry suggested launching efforts to communicate the relative risks between smoking and vaping to smokers. The impression given by the imposition of a "sin tax" on vaping is that it is just as harmful as smoking and therefore does not benefit public health. This indirect messaging may discourage smokers from switching to vaping and reinforce misunderstandings about the risks associated with vaping.


Furthermore, without coordination from all provinces, the potential outcome of Quebec's taxation could result in the closure of local small-scale electronic cigarette businesses, while businesses in other provinces and the black market will satisfy demand for electronic cigarette products. "On top of federal taxation, individual provinces imposing punitive tariffs could reach the Laffer peak of local revenue. Such taxes will redirect purchases from in-province resources to online out-of-province suppliers and the black market," said Professor Ian Irvine when discussing Canadian consumption taxes.


CVA has proposed several practical and less harmful solutions to protect adolescents. Education, prevention, and enforcement are the best tools to protect young people from nicotine temptation. With recent regulatory changes, the illegal market for e-cigarette products has grown exponentially. More resources are needed to enforce this market. At present, the prevalence of illegal products makes it convenient for young people as illegal sellers do not check IDs. Imposing high taxes on e-cigarettes will accelerate the growth of this market and repeal years of regulation aimed at protecting young people.


Nova Scotia is the first province to introduce both an e-cigarette tax and flavor ban. These measures, combined, have decimated the e-cigarette industry in Nova Scotia, with cigarette sales increasing by 5.6%. The ban on flavors ensures the existence of a black market and increases cross-province sales. Professor Irvine of Concordia explains, "E-cigarettes and combustible cigarettes are substitutes, so keeping taxes on low-risk products low is crucial in encouraging smokers to switch to low-risk products." The Quebec government must consider the potential return of combustible tobacco and the increase in enforcement demands after consumption taxes. "Tobacco and nicotine taxation are a joint jurisdiction, and if provinces decide to match federal taxation, the industry will shrink significantly. The best estimate is $396 million in additional taxes and $609 million in supplier revenue loss," he estimates. This will have a devastating impact on Quebec's small e-cigarette businesses and public health.


We need this data so that Canadians and regulatory agencies can fully understand the impact of these policies. Research on three U.S. states with similar policies found that bans on flavored tobacco and taxes led to an increase in smoking rates among both adults and youth populations.



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