Monday, 17 February 2014

Tax on e-cigarettes, what will governments do?

On Saturday I wrote about one smokers wanting to save money, and ended up saving their own life: http://goo.gl/7uEsgy. In conclusion better health and better personal economy is two long term effects of vaping that we can be sure of. But as you can see this is about the personal economy of the individual, but what about the country's economy? The country will loose a lot of tax income if people stop smoking, but will the money they save on health care for these smokers make up for the loss? This article, http://goo.gl/PF23lw, discusses that issue in the UK and US, and it shows that the US would benefit economically if everyone stopped smoking while in the UK the effect would be the opposite.

The Norwegian Directorate of Health published some numbers on this in 2011: http://goo.gl/h7yfqr (the compete report can be found here: http://goo.gl/VzlUTI). The annual income from tobacco taxes was 8 billion NOK (100NOK is around £10), but the annual cost estimates related to tobacco smoking varies from 8 billion to 80 billion depending on how you calculate this. In the lowest estimate only health care costs and production losses due to sickness and early death is considered, while in the higher estimates they also take into account the value of lost life years and reduced quality life years. The report also estimates that the reduction in tobacco smoking we have had in the last 20 years here in Norway represents savings of around 25 billion NOK annually. Further reduction would give savings on around 2-3 billion NOK per percentage point. So here in Norway we are not dependent on the tax income from tobacco. However I doubt this is something that Norwegian politicians have thought about. The percentage of cigarettes smoked in Norway that was actually bought in Norway is sinking towards 50% (http://www.nettavisen.no/2826504.html), which means the tax income could be a lot more. The reason for this is of course that the taxes on tobacco is really high... so actually the politicians may have put us in this position unintentionally?

I totally agree with what Karl Erik Lund said in the interview I posted here in the beginning of January; the ethical side of this of course needs to be the basis of a reasonable health policy. He says such calculations are absurd in this matter, but I think they have some relevance anyway. The reason, as shown in the article I mentioned in the beginning, is that some countries have actually made themselves dependent on the tax income from tobacco. This is definitely not good. As we have seen above, this should not be the case in the US and Norway as these countries will benefit economically from this, but in the UK it becomes a problem. Their government has already made the mistake and the money has to be taken from somewhere. So something has to be done about this, and taxing e-cigarettes would be as unethical in the UK as it would be in the US and Norway. So it is important that the UK government is aware of this and take measures to turn the situation around NOW so that they are not depending on tax income from tobacco before it's to late. These calculations should have been done long time ago, because making one self dependent on such "sin-taxes" will always lead to economical problems eventually. The UK government, if they don't act quickly, will end up in a very difficult situation: One option is to place taxes on a product that will save millions of lives, and they will have a hard time explaining that to the public. Another option would be to increase other taxes, meaning the whole public (not only smokers) would have to pay for their earlier mistake. I wonder how they are going to solve this one... and if they are able to correct, and learn from, their mistake. I don't think it's impossible, but they do need to be aware of these numbers to fix it. And they do need to keep the ethics their to top priority to avoid getting into trouble again. Explaining why you place taxes on a life-taking product is easy, doing the same on a life-saving product is a totally different ball game.

5 comments :

  1. Thank you. The links are going to be useful. Well said

    ReplyDelete
  2. Maybe taxing those soft drinks and fast foods along with raising the taxes on real tobacco could suffice. Ha! Or perhaps a little less "Nanny State-ism" is the answer. As you and I are well aware, taxing healthy choices is a grave error (no pun intended). Thanks for the link Vaping Giraffe

    ReplyDelete
  3. Nice bit of writing. I hold out no hope for the UK Gubbinsment having a metric milligram of...1/. Common sense and 2/. Common decency.

    ReplyDelete
  4. Did you know you can shorten your links with LinkShrink and receive $$$$ from every visit to your shortened links.

    ReplyDelete
  5. VaporFi is the highest quality electronic cigarettes supplier.

    ReplyDelete