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Tax hike on vape products may have adverse impact, expert says

THE Malaysian government recently approved a taxation framework for nicotine vape in Malaysia, which would take effect on January 1, 2022. 

Prior to this, there was just an RM0.40 per millilitre tax on non-nicotine vape liquids in Malaysia.

Starting January 1, 2022, the tax rate for both nicotine vape and non-nicotine vape liquids will be hiked to RM1.20 per millilitre of vape liquid.

While this means that vape product sellers can carry store operations without worrying about the legitimacy of their businesses, this tax hike may impact the country in various ways.

According to a report commissioned by Malaysian Vape Industry Advocacy (MVIA), over 80 per cent of Malaysian ex-smokers credit vaping to have helped them quit smoking.

This shows that vaping might be an effective smoking cessation tool. However, with the hike in tax rates on vape liquids, it will cause prices of vape liquids to skyrocket and might deter smokers from using vape leading to more cigarette consumption instead.

International tobacco harm reduction specialist Clive Bates shared his insights with the New Straits Times regarding these latest developments.

Bates has extensive experience in the field of tobacco harm reduction, having served as Director of Action on Smoking and Health (UK), a campaigning organisation dedicated to reducing tobacco-related harms.

He's also worked as a special advisor to the UK Department of Energy and Climate Change, as well as in high positions in the public sector and for the UN in Sudan.

Talking about the tax hike on vape liquids, Bates mused, "The result will be more smoking, more harm and unwarranted protection of the cigarette industry. It's hard to see what purpose that would serve other than raising money from people who are trying to improve their own health and at their own expense."

Citing the current situation in the United Kingdom (UK), Bates highlights that there aren't any vaping taxes because the government recognises vaping as a smoking cessation tool.

PRICE COMPARISON

Malaysia's tax proposal is quite high by European standards. Germany will collect only €0.16 (RM 0.77) per millilitre beginning July 1, 2022, with further increases along the way.

However, what matters is the price difference between vaping and smoking in Malaysia, not the price difference between the UK and Malaysia. 

Furthermore, because typical salaries in the United Kingdom and Germany are higher, these taxes may hurt more Malaysians than they do in Europe.

ADVERSE EFFECTS

The tax hike on vape liquids may possibly lead to a host of negative consequences.

First, some vapers, particularly those who are still transitioning from smoking to vaping, may revert to smoking again. 

"Fewer smokers will transition to non-smoking cigarettes, while more will continue to smoke. Also, rather than vaping, more young people will choose to smoke," cautioned Bates.

Besides that, a black market may emerge as a result of the government's levy, which would provide a high profit margin for criminal suppliers.

People may also attempt workarounds such as producing their own liquids or purchasing homemade liquids from friends.

This may be cause for concern due to a lack of regulations and safety standards.

"Exactly which of these we will see most of is hard to predict, but the government should definitely monitor the impact of its policy closely and report back on what effect it has had," he recommended.

"And if it has caused more harm than good, the policy should be reversed."

In light of the potential negative side effects of the tax hike, it is worth considering the regulation of vaping products, with a focus on consumer protection and chemical, electrical and thermal safety. 

Other areas of regulation to be implemented include product standards, product registration, controls on the themes and location of advertising, information regarding risk and relative risk, limitation of sale to over 18s and prevention of marketing directed at youngsters.

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