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News

VBI response to European Commission public consultation on excise duties

VBI is a business alliance spanning the vaping product supply chain from manufacture to sale, committed to an open debate about vaping products in Ireland. VBI favours an effective, evidence-based and balanced regulatory and fiscal approach by Government and the European Union with respect to vaping products.

We are keen to engage with the European Commission to ensure that regulatory and fiscal measures neither unduly restrict the development of this market nor create unfair competition between SMEs active in Ireland in this sector and those selling online to Irish consumers from other EU Member States.  We are of the view that the imposition of excise on vaping products would in fact lead exactly to that scenario and as such we are opposed to the imposition of excise on vaping products.

 

Vaping products do not contain tobacco and are not cigarettes and therefore should not be taxed as such.  Vaping products are electronic consumer products, which are already subject to a VAT rate of 23%, that provide an alternative to conventional tobacco cigarettes.  In August 2015, Public Health England (PHE) found that vaping products are around 95% less harmful than smoking.  The UK’s Institute of Economic Affairs (IEA) Discussion Paper on Understanding the Basics Economics of Tobacco Harm Reduction argues that an excise tax on vaping products would create a black market and that an excise would run contrary to not just normal policy ethics but to the most fundamental ethics, that people should be free to make informed choices.

 

Research published by Cancer Research UK on 7 February 2017, which is the first long-term study of the effects of vaping in ex-smokers, found that after six months’ people who switched from cigarettes to vaping products had far fewer toxins and cancer-causing substances in their bodies than smokers.  It is clear that vaping provides a huge benefit to those looking to quit smoking, with 32% of those who have successfully quit using vaping to do so in Ireland alone.  Anything that would demotivate smokers from using vaping as an alternative, such as an excise tax, is something we would look at as a negative for ex-smokers and public health objectives.

 

VBI note that there are between 100,000-150,000 vaping product users in Ireland, of which 99% are ex-smokers yet receive no public money from our public health service (HSE), the Government or the Department of Health.  VBI members estimate that the vaping sector already employs about 300 people directly in Ireland, with many more indirectly employed (retailers etc.).

 

Given the growing consensus amongst the public health and medical community on the potential successful evolution of these products, tobacco cigarette-style excise tax on vaping products would be entirely inappropriate.

 

IRELAND

In July 2016, the Irish Tax Strategy Group (TSG) acknowledged that vaping products are 95% less harmful than cigarettes, that they have the potential to be an alternative to smoking and that placing an excise tax on the consumer electronic products “could in turn undermine the broader public health objective of reducing tobacco consumption”.  In 2015, the TSG estimated that a 50c tax per 10ml would yield €8.3 million per annum.  However, it also noted that “the implementation and collection of such a tax would be difficult given the wide variety of ways in which these products are supplied to the consumer and many sources consider e-cigarettes to be a cessation tool and certainly less harmful than cigarettes”.  For example, if a duty were to be imposed on the ‘liquid’, the price of the electronic consumer product could as much as double and the implementation and collection would be difficult given the many ways they can be purchased.

 

When Irish Minister for Finance Michael Noonan was asked about a taxation on vaping products in 2015 he stated that “electronic cigarettes do not contain tobacco, and there is no combustion involved. Accordingly, neither e-cigarettes nor e-liquid fall under the harmonised regime for the taxation of tobacco products contained in the Tobacco Excise Directive (Directive 2011/64/EU)”.   He also stated that due to the large number of vaping products and liquids that are purchased online “it is difficult to estimate how large the market for such products is in Ireland”.   VBI estimate that up to 70% of the total percentage of sales of vaping products in Ireland are from online sales therefore it would be very difficult to capture the online sales within any tax regime in Ireland.

 

We would also note that many EU Member States have decided against implementing an excise tax on vaping product such as UK, France, Germany, Spain and Belgium, among many others due to the fact they are not cigarettes and do not contain tobacco.  VBI disagree with placing an excise style tax on a consumer electronic product that are offering many an alternative to smoking.

 

 

By making vaping more expensive, we risk damaging compliant and legitimate businesses. By making vaping more expensive, we risk damaging compliant and legitimate businesses in a promising industry. The vaping market is still nascent and is therefore highly price-elastic, meaning that imposing excise tax would run a high risk of stifling its growth. This is borne out by recent research conducted by Huang and co-authored by Frank J Chaloupka, which found that a 10% increase in price reduces sales of disposable vaping products by approximately 12%, and by about 19% for reusable vaping products, suggesting that policies altering vaping products retail prices, such as limiting rebates, discounts and coupons and imposing a tax, could potentially lead to significant reductions in vaping and the number of legitimate businesses.  The vaping industry invests in ensuring full compliance of TPDII regulations and an additional layer of excise onto compliance cost would seriously undermine the business models of our sector.

 

We also note on the issue of extending the scope of excisable products to vaping products the European Commission, in their Inception Impact Assessment on Possible proposal for revision of Council Directive 2011/64/EU of 21 June 2011 on the structure and rates of excise duty applied to manufactured tobacco, stated that placing excise on vaping products could lead to a price increase which might affect the choice of consumers”.  In the context of the Irish Draft Health technology assessment (HTA) of smoking cessation interventions, published in January 2017 by the Health Information and Quality Authority (HIQA), a change in choice for consumers would fly in the face of recognition in Ireland that vaping products are a viable alternative to smoking and should be regarded as such in the context of policy development at national and EU level.  It also stated that “the impacts on SMEs could be relatively higher than for other economic operators. For instance, the options to adjust the scope of excisable products by including e-cigarettes and raw tobacco could lead to an increase of the administrative burden for all economic operators, with a possibly relatively higher impact on SMEs than on larger enterprises.”

 

Canadian studies show that taxes can increase the size of black markets and cause economic activity to shift underground as price-sensitive consumers look for alternative channels for sourcing tax-free or lower-tax products.  In light of the Huang findings cited above, therefore, there is a high risk that excise-induced price increases would lead vapers to purchase e-liquids via unregulated channels (for instance illegal internet sales from foreign-based suppliers) or may even resort to mixing e-liquids at home using untested solutions and high-strength nicotine.

 

 

In summary, Vaping products are consumer electronic, not tobacco products and differ also in terms of their content, use, effects and means of manufacture.  The is a fast-evolving category that is highly fragmented and would be a very complex category to tax due to the variation of device types, liquids and can be bought from a large range of sources – manufacturers, importers, wholesalers, retailers and online.   As such vaping products, should be considered as an entirely separate category to tobacco products and therefore should not be subjected to excise.  Vaping products demonstrate a very successful less harmful alternative to smoking, which should be embraced and encouraged and not taxed and placed in the same bracket as smoking.

 

 

 

Department of Health update: guidance on commercial communications restrictions for e-cigarettes and refill containers

The Department of Health have developed a guidance on commercial communications restrictions for e-cigarettes and refill containers, which can be found below. For more information about this guidance, please visit the website of the Department of Health.


The purpose of this guidance is to provide assistance to those advertising e-cigarettes or refill containers under Regulation 31 of the European Union (Manufacture, Presentation and Sale of Tobacco and Related Products) Regulations 2016 (S.I. No. 271 of 2016).

As interpretation of the law is a matter for the Courts, this guidance is intended to provide general information on the above Regulations and should not be construed as legal advice. It is without prejudice to any other legal obligations under criminal or civil law.

Background

The Tobacco Products Directive 2014/14/EU (TPD) introduces new rules for commercial communications relating to e-cigarettes and refill containers (Article 20 (5)). These new rules were transposed into Irish legislation by Regulation 31 of the European Union (Manufacture, Presentation and Sale of Tobacco and Related Products) Regulations 2016 and are effective from 20th May 2016.

The Health Service Executive (HSE) is responsible for implementing and enforcing the provisions under Regulation 31.

1. The new rules (subject to the exemptions at 2) prohibit:

·   commercial communications in information society services with the aim or direct or indirect effect of promoting electronic cigarettes or refill containers;

·   commercial communications in the press, with the aim or direct or indirect effect of promoting electronic cigarettes or refill containers;

·   commercial communications in other printed publications, with the aim or direct or indirect effect of promoting electronic cigarettes or refill containers;

·   commercial communications on the radio, with the aim or direct or indirect effect of promoting electronic cigarettes or refill containers;

·   any form of public or private contribution to radio programmes with the aim or direct or indirect effect of promoting electronic cigarettes or refill containers;

·   any form of public or private contribution to any event with the aim or direct or indirect effect of promoting electronic cigarettes or refill containers and involving or taking place in two or more Member States or otherwise having cross-border effects;

·   any form of public or private contribution to any activity with the aim or direct or indirect effect of promoting electronic cigarettes or refill containers and involving or taking place in several Member States or otherwise having cross-border effects;

·   any form of public or private contribution to any individual person with the aim or direct or indirect effect of promoting electronic cigarettes or refill containers and involving or taking place in several Member States or otherwise having cross-border effects;

·   audiovisual commercial communications to which the Broadcasting Act 2009 (No. 18 of 2009) and the European Communities (Audiovisual Media Services) Regulations 2010 (S.I. 258 of 2010) applies for electronic cigarettes and refill containers.

2. An exemption is provided for the advertisement of e-cigarettes and refill containers:

·   in publications that are intended exclusively for professionals in the trade of electronic cigarettes or refill containers, and

·   in publications that are not principally intended for the European Union market where such publications are printed and published in third countries.

3. The new rules do not apply to the advertisement of e-cigarettes and refill containers:

·   at the point of sale in retail outlets where electronic cigarettes and refill containers are sold;

·   in or on outdoor areas such as billboards, posters and bus shelters; and,

·   at events that have no cross-border effects (and which are not going to be broadcast).

The table below outlines in more detail what is now prohibited under the Regulations and what is permitted under the Regulations.

Type of Advertising

Contact

·   To contact the Tobacco and Alcohol Control Unit of the Department of Health, please email tobacco@health.gov.ie

·   To contact the National Tobacco Control Operational Unit of the Health Service Executive, please email info.tpd@hse.ie

Department of Health update: guidance on the notification of e-cigarettes and refill containers

The Department of Health have developed a guidance on the notification of e-cigarettes and refill containers, which can be found below. For more information about this guidance, please visit the website of the Department of Health.

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Guidance on the notification of e-cigarettes and refill containers

The purpose of this guidance is to provide assistance to manufacturers and importers of e-cigarettes and refill containers on the notification requirements under Regulation 26 of the European Union (Manufacture, Presentation and Sale of Tobacco and Related Products) Regulations 2016 (S.I. No. 271 of 2016).

As interpretation of the law is a matter for the Courts, this guidance is intended to provide general information on the above Regulations and should not be construed as legal advice. It is without prejudice to any other legal obligations under criminal or civil law.

Background

The Tobacco Products Directive 2014/14/EU (TPD) introduced new rules for nicotine-containing electronic cigarettes (e-cigarettes) and refill containers (Article 20).

The new rules include:

1. notification requirements for manufacturers and importers of e-cigarettes and refill containers;
2. prohibition of promotional elements on e-cigarette and refill container packaging;
3. prohibition of cross-border advertising and promotion of e-cigarettes and refill containers;
4. mandatory safety and quality requirements for e-cigarettes and refill containers, including the setting of maximum nicotine concentration levels and maximum volumes for cartridges, tanks and containers of nicotine liquids;
5. requirements to ensure that e-cigarette ingredients are of high purity and that e-cigarettes deliver the same amount of nicotine for puffs of the same strength and duration;
6. requirements that e-cigarettes and refill containers are child-resistant and tamper proof and have a mechanism that ensures refilling without spillage to protect consumers;
7. obligatory health warnings advising consumers that e-cigarettes contain nicotine;
8. mandatory  listing of all ingredients contained in the product, information on the product’s nicotine content and a leaflet setting out instructions for use and information on adverse effects, risk groups and addictiveness and toxicity;
9. stricter rules on monitoring of market developments of e-cigarettes and refill containers;
10. an obligation on manufacturers, importers and distributer of e-cigarettes and refill containers to collect information on suspected adverse effects on human health;
11. an obligation on manufacturers, importers and distributer of e-cigarettes and refill containers to take corrective action and inform the Health Service Executive [competent authority] if he or she believes that an e-cigarette or refill container is not safe or is not of good quality or does not conform with the Regulations; and
12. mandatory registration for retailers engaged in cross-border distance sales of e-cigarettes or refill containers in Member States where such sales are not prohibited. To obtain a Registration Form and information on the registration process please contact the HSE. Information on the Tobacco Products Directive is also available on the HSE’s website.

The TPD was transposed into Irish legislation by the European Union (Manufacture, Presentation and Sale of Tobacco and Related Products) Regulations 2016 (S.I. No. 271 of 2016) (2016 Regulations) which came into operation on 20 May 2016.

Part 5 of the Regulations sets out the requirements for e-cigarettes and refill containers.

The Health Service Executive (HSE) is responsible for implementing and enforcing the provisions under Part 5 of the Regulations and has been designated as the competent authority for the notification process for e-cigarettes and refill containers in the Republic of Ireland.

E-cigarettes or refill containers manufactured or released for free circulation before 20 November 2016, which are not in compliance with the labelling and product composition requirements of the 2016 Regulations may be placed on the Irish market until 20 May 2017.

Retailers have until 20 May 2017 to sell through stock of products that do not comply with the labelling and product composition requirements of the 2016 Regulations.

All e-cigarettes and refill containers manufactured or released for free circulation after 20 November 2016 must be in compliance with 2016 Regulations.

The following provisions of the 2016 Regulations are effective from 20 May 2016 for all e-cigarettes and refill containers on the market irrespective of the date on which they entered the market:

– registration of  cross-border distance sales of e-cigarettes and refill containers (Regulation 25(3));
– notification of e-cigarettes and refill containers (Regulation 26);
– commercial communications relating to e-cigarettes and refill containers (Regulation 31);
– market developments concerning e-cigarettes and refill containers (Regulation 32); and
– public health concerns relating to e-cigarettes and refill containers (Regulation 33).

Guidance on notification of e-cigarettes and refill containers

Under Regulation 26 of the 2016 Regulations, a manufacturer or importer of an e-cigarette or refill container must submit a notification to the Health Service Executive of any such products he or she intends to place on the Irish market.

The notification must be submitted through a European Union Common Entry Gate (EU-CEG) made available by the European Commission. Guidance on the EU-CEG and how to apply for a submitter ID and a European Commission Authentication Account (ECAS) account is available from the European Commission’s website.

Notification of a product on the Irish market before 20 May 2016 must be submitted by 20 November 2016.  Notification of a new or a substantially modified product must be submitted not less than 6 months before placing it on the Irish market.

The obligation to notify a product does not apply to retailers unless he or she also falls within the definition of a manufacturer or importer.

A manufacturer is defined as any natural or legal person who manufactures a product or has a product designed or manufactured, and markets that product under their name or trademark.

If a retailer also qualifies as a manufacturer, he or she must submit a notification for each relevant product.

An importer is defined as the owner of, or a person having the right of disposal over, tobacco or related products that have been brought into the territory of the European Union.

If a retailer also qualifies as an importer, he or she should check with his or her manufacturer if they have already submitted a notification for each relevant product.

If the manufacturer has already done so, the importer does not need to submit a duplication notification.

Guidance on the content and format of notifications

The content and format of a notification are set out in Regulation 26 of the 2016 Regulations and Commission Implementing Decision (EU) 2015/2183 of 24 November 2015.

Discussion papers developed by Member States are set out below.  The aim of the papers is to provide guidance to manufacturers and importers submitting notifications for their products.

E-cigarette Working Group Discussion Papers on Submission of Notifications under Article 20 of Directive 2014/40/EU:

Chapter 1 – Submission Type
Chapter 2 – Product Type
Chapter 3 – Emissions from Electronic Cigarettes
Chapter 4 – Dose of Nicotine Delivered & Uptake and Consistency of Dose

Fees

Under the 2016 Regulations, there is no fee for notifying e-cigarettes or refill containers. This reflects the current legislative position and is subject to any future legislative amendment.

Contacts

– For general matters related to the functioning of the EU-CEG, please contact SANTE-EU-CEG@ec.europa.eu. Should you experience technical difficulties with this, please include a ‘print screen’ of the error in your message
– To contact the National Tobacco Control Operational Unit of the Health Service Executive, please email info.tpd@hse.ie.
– To contact the Tobacco and Alcohol Control Unit of the Department of Health, please email tobacco@health.gov.ie

UK government publishes the SI which states the notification fee for vaping products.

The UK government has published the Statutory Instrument (SI) which states the notification fee for vaping products in the UK. 

Notification fee

2.—(1) A fee is payable in respect of each notification submitted to the Secretary of State under regulation 31(1) of the 2016 Regulations (notification about electronic cigarettes and refill containers).

(2) The amount of the fee payable is £150 except where the notification under regulation 31(1) of the 2016 Regulations is submitted pursuant to regulation 31(2) of the 2016 Regulations (substantially modified products) in which case the amount is £80.

(3) The fee is payable at the time the notification is submitted.

(4) The fee is payable by the person submitting the notification and is payable to the Secretary of State.

Annual Fee

3.—(1) An annual fee is payable in respect of each product notified under regulation 31(1) of the 2016 Regulations.

(2) The amount of the annual fee payable is £60.

(3) The annual fee is payable each year on 1st April.

(4) The annual fee is first payable on the first occurring 1st April after the day the product is notified to the Secretary of State.

(5) The fee is payable by the person who submitted the notification and is payable to the Secretary of State.

(6) The annual fee ceases to be payable if the Secretary of State is notified under regulation 31(7) of the 2016 Regulations that the product has been withdrawn from the market; but any annual fee payable prior to the day the Secretary of State is notified remains payable.

Adjustment of Fee

4.  If, after a notification fee under regulation 2 has been paid, it becomes apparent that—

(a)a lesser fee should have been paid, the excess shall be refunded to the person who paid the fee; or

(b)a higher fee should have been paid, the balance shall become payable by the person who paid the fee within fourteen days commencing with the day that the Secretary of State issues written notice to that person of the correct fee payable.

Civil proceedings to recover unpaid fees

5.  All unpaid sums due by way of any fees payable under these Regulations shall be recoverable as debts due to the Crown.

Full SI here.

European Commission Implementing Decision (EU) 2016/586 of 14 April 2016 on technical standards for the refill mechanism of electronic cigarettes

The European Commission published the Implementing Decision on technical standards for refill mechanism of e-cigarettes.  This Implementing Decision will be transposed in the national regulations.

This Decision lays down the technical standards for the refill mechanism of electronic cigarettes manufactured in or imported into the Union.

Article 2

Requirements for the refill mechanism

  1. Member States shall ensure that refillable electronic cigarettes and refill containers are only placed on the market if the mechanism by which the electronic cigarettes are refilled meets one of the following conditions:

(a) it entails the use of a refill container possessing a securely attached nozzle at least 9 mm long, which is narrower than and slots comfortably into the opening of the tank of the electronic cigarette with which it is used and possessing a flow control mechanism that emits no more than 20 drops of refill liquid per minute when placed vertically and subjected to atmospheric pressure alone at 20 °C ± 5 °C; (b) it operates by means of a docking system which only releases refill liquids into the tank of the electronic cigarette when the electronic cigarette and refill container are connected.

2. Member States shall ensure that refillable electronic cigarettes and refill containers include appropriate instructions for refilling, including diagrams, as part of the instructions for use required by Article 20(4)(a)(i) of Directive 2014/40/EU.

Refillable electronic cigarettes and refill containers with a refill mechanism of the type referred to in paragraph 1(a) shall indicate the width of the nozzle or width of the opening of the tank in the instructions for use in a manner that enables consumers to identify the compatibility of refill containers and electronic cigarettes.

Refillable electronic cigarettes and refill containers with a refill mechanism of the type referred to in paragraph 1(b) shall specify, in the instructions for use, the types of docking system with which such electronic cigarettes and refill containers are compatible.

 

 

Please find the Decision here – CELEX_32016D0586_EN_TXT