WINNIPEG – Electronic cigarettes are taking a bite out of Manitoba’s tobacco tax revenues.
The provincial government raised tobacco taxes by $1 a carton in last week’s budget but is expecting tobacco tax revenues to drop by about 12 per cent from last year.
The main reason for the drop is people switching from tobacco to electronic cigarettes, said Barry Draward, an assistant deputy minister of finance.
Battery-operated e-cigarettes are not subject to tobacco taxes and are used by some people as a nicotine-free alternative.
Others use them with nicotine cartridges to get the same nicotine hit as a regular cigarette without the smoke or tobacco.
The jury is still out as to whether e-cigarettes are an alternative form of tobacco cigarettes or a stop-smoking aid, and there may be tax implications, Draward said.
“It would be a health (department) decision, regardless,” he said. “If they’re saying it’s a cigarette replacement, then, in my opinion, we’ve got to tax it, but we don’t know that yet.”
Manitoba has among the highest tobacco tax rates in the country. At 29.5 cents per cigarette, it’s almost half the price of the product.
E-cigarettes and their flavoured cartridges are subject only to the eight per cent provincial sales tax.
Products that are designed to help people stop smoking, such as nicotine patches or gum, are tax-exempt.
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