Taxes on vaping products produced or imported into Canada are set to increase starting July 1. This change, part of the 2024 federal budget, aims to reduce vaping among Canadians as part of the country’s broader strategy to cut tobacco use to below five percent of the population by 2035. However, some experts and industry insiders are skeptical about its impact on consumer behavior.
According to Statistics Canada, young adults are more likely to vape than smoke. A 2022 survey revealed that nearly half of Canadians aged 20 to 24 have tried vaping, with one in ten using vape products daily. Rob Cunningham, a senior policy analyst for the Canadian Cancer Society, stated in a press release that “Increasing tobacco taxes is the most effective strategy to reduce smoking, especially among youth.”
Mixed Reactions from Retailers
Despite the upcoming tax increase, some vape store employees are doubtful it will significantly affect their business. Sahil Marsoniya, who works at Ottawa Vape, mentioned that customers have been buying supplies in bulk before the tax hike takes effect. “They’re all addicted,” Marsoniya said. “They’ll lose more money, but they will not stop.”
Waleed Ramadan, a vendor at Mr. Smoke in Ottawa’s ByWard Market, echoed this sentiment. “Stop them vaping? I doubt it,” he said, highlighting the addictive nature of nicotine.
Details of the Tax Increase
The 2024 federal budget proposes a 12 percent increase in the federal tax on vaping products, with provinces given the option to match this increase. Vaping products are taxed based on their volume. Previously, the federal tax was $1 per two milliliters for the first 10 milliliters of liquid and then $1 for every additional 10 milliliters. For instance, a product taxed at $1 on June 30 will be taxed at $1.12 on July 1.
Ontario will also implement its own provincial excise tax starting July 1, matching the federal increase. Therefore, a manufacturer that pays a federal tax of $1.12 will face a combined tax of $2.24 in Ontario. The federal government estimates that these tax increases will boost federal revenue by $310 million over the next five years.
Impact on Consumers
While the tax hike takes effect on July 1, consumers might not notice immediate price increases. The excise tax is applied to manufacturers at the time of sale or import. The federal government has provided a 90-day grace period beginning July 1, during which manufacturers can sell products produced or imported before the new tax came into effect without applying the new tax. Once this stock is sold, manufacturers are likely to incorporate the new taxes into their prices, which could eventually be passed on to consumers.
Ottawa resident Dylan Colton said he might consider quitting vaping due to the price increase but not giving up nicotine entirely. To save money, Colton is considering switching to nicotine pouches. “I’m probably going to convert to Zyns,” he said.
Conclusion
As the new tax regulations come into effect, the vaping industry and its consumers in Ontario will be watching closely to see how these changes influence behavior and market dynamics. While the government hopes to curb vaping, especially among youth, the real impact of these tax hikes remains to be seen.