Starting this month, a tax of R2.90/ml will be imposed on both nicotine and non-nicotine vape juice, leading to an expected increase in the prices of vaping products. Asanda Gcoyi, CEO of the Vapour Products Association South Africa, expresses concern that the tax is excessive and predicts that it will drive more individuals towards smoking.

On the other hand, representatives from an excise tax research unit argue that the tax falls short of being sufficient. They believe that additional measures should be taken to address the issue. It is noteworthy that this tax increase marks the first introduction of a sin tax for vaporised tobacco products in South Africa. Let’s take a deep dive into the new vaping taxes from June 2023.

Taxing Of Vaping Tobacco Products Starting 1 June 2023

Starting from June 1, 2023, there will be a new tax on vaping tobacco products. The Minister of Finance announced this measure in the 2022 budget on February 23, 2022. The tax will apply to nicotine and nicotine-substitute solutions found in vaping products, with a fixed rate of R2.90/ml.

To accommodate the inclusion of vaping products in the tax system, the DA260 Excise Account for Tobacco Products has been updated. Manufacturers of these products must apply for licences for their manufacturing premises from the South African Revenue Service (SARS) before June 1, 2023. They are also required to submit their first excise duty account by July 28, 2023. Additionally, special storage warehouses for these products must obtain licences from SARS before June 1, 2023.

Thoughts On The New Vaping Tax Implications

The vaping industry has expressed its belief that the tax imposed on vape juice is excessive, while a research unit specialising in excisable products argues that the tax increase does not go far enough.

Asanda Gcoyi, CEO of the Vapour Products Association South Africa (VPASA), highlights that the introduction of the R2.90/ml tax on vape juice from June 1 could potentially result in more than a doubling of prices for some products. For instance, a 100-millilitre bottle of vape juice currently priced at R200 would increase to R490 if the entire tax is passed on to consumers.

Gcoyi acknowledges that the vaping industry was aware of the potential tax increase and its discussions over the years. However, she deems the R2.90/ml rate to be too high for an introductory level.

VPASA anticipates a 26% decrease in demand for vape juice following the implementation of the excise tax, which could have implications for businesses and employment, leading to an estimated loss of 2,250 jobs by the end of 2023. Gcoyi believes that people may revert to smoking more affordable tobacco products.

In contrast, Corné van Walbeek, director of the Research Unit on the Economics of Excisable Products (REEP), argues in a written submission to Parliament that the R2.90/ml tax may not sufficiently deter vaping. REEP proposes a higher R5/ml tax with a minimum tax burden of R50 on the sale of electronic nicotine and non-nicotine delivery systems.

Under the R2.90/ml tax scheme, certain products, such as disposable vapes, would have a tax as low as 8.4% of the retail price. A representative affiliated with REEP, Ms Van der Zee, suggests that the reduction in demand resulting from the R2.90/ml tax may be smaller than the 26% decrease cited by Gcoyi, based on previous research on the impact of tobacco taxes on cigarette demand.

While treating vaping products similarly to tobacco products is a contentious issue, Van Walbeek notes that the R2.90/ml tax consistently imposes lower tax burdens on electronic cigarettes compared to tobacco products. Van der Zee suggested that vaping products should not necessarily be taxed at the same level as tobacco products but should be closer in taxation.

Health Implications

Regarding the health implications of vaping, Gcoyi argues that scientific research indicates vaping carries less than 5% of the health risks of smoking. Gcoyi acknowledges minimal adverse health effects associated with vaping but believes it is a step towards harm reduction and moving people away from smoking. She suggests providing access to less harmful products for individuals who still desire nicotine. She further advocates for a sin tax on vaping products that aligns with the harm caused by vaping. There is also the danger that vapers will now turn to illegal vaping products. 

In contrast, Van der Zee suggests that the vaping industry may be inclined to emphasise findings favouring their products. She acknowledges that e-cigarettes can serve as a “gateway” for non-smokers to start using nicotine, creating a new avenue for adopting a harmful habit.

The jury is still out on whether vaping is more of a cessation tool or a gateway, according to Van der Zee. She recommends a cautious approach, considering the uncertain health impacts of vaping, instead of assuming it enables smoking cessation.

REEP plans to release additional data later this month, which may shed more light on these topics. Van der Zee emphasises the need for nuanced discussions and regulatory approaches to vaping, as countries worldwide grapple with its regulation.

Vaperite’s Approach To The Increase Of Vaping Tobacco Tax

Unfortunately, the R2.90 per ml excise tax on nicotine and nicotine-substitute e-liquid is still on track to be introduced on 1 June 2023. We are working closely with VPASA and legal experts to explore possible options to ease the impact of this tax.

We would like to assure our customers that Vaperite will not be increasing e-liquid prices on 1 June as we have not had to pay excise tax on our current stock, and we have enough pre-excise e-liquid stock to get us through the month of June 2023. 

We have not decided on our pricing strategy going forward from August 2023 onwards, but you can anticipate certain prices increasing, specifically on disposable devices, as these are subject to being taxed on import.

We will attempt to limit price increases through the remaining months of 2023 and will raise them gradually as and when the tax starts to affect our production and import costs.

We are working on a few innovative methods to limit the impact of the tax on e-liquid prices, and these will be communicated to you when we are ready to take them to market. We do understand that these changes may come as an inconvenience, and we want to thank you for your understanding and support during this transition.

As a company, we remain committed to providing you with high-quality vape products at affordable prices. We appreciate your continued business and look forward to serving you in the future.

Thank you for your continued support and loyalty to Vaperite.

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