Taxation: Heated Tobacco Products

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Taxation: Japan (December 2023)

The Japanese Government is considering to raise the tax burden on heated tobacco1, bringing it to the same level as cigarettes, as part of a plan to finance the increased defense spending. The proposal could be included in the ruling Liberal Democratic Party’s tax reform outline to be released later this month. At the end of 2022, the Cabinet already approved a plan to increase the tobacco excise tax by ¥3/stick – resulting in ~¥200Bn ($1.4Bn) additional tax revenue.

In parallel to the increasing popularity of heated tobacco, Japan reformed heated tobacco taxation twice since 2018 – substantially reducing the tax advantage of the category vis-a-vis cigarettes: firstly, by defining a new tax category called “heat-not-burn tobacco” in 2018 (replacing the classification as a low-taxed “pipe tobacco”) and secondly, by implementing a pure specific excise tax system in 2022.  

Taxation: Heat-sticks with no tobacco (December 2023)

At the 2023 Investor Day, PMI disclosed its intention to proactively engage with the authorities to set a tax for non-tobacco heatsticks even if it could be assumed that the product (PMI: LEVIA, BAT: veo, Imperial Brands: iSenzia) can be launched without an excise tax obligation as it does not fit into any existing (excisable product) categories.

In the revised tax bill2, Greece specifies a new category called “smoke-free electrically heated product” in addition to the already existing “electrically heated tobacco product” category. The new category is defined as a manufactured product, which does not contain tobacco, is intended to be inhaled by means of a heating process rather than combustion and contains nicotine (or nicotine substrate) and other nicotine-free substances (or other substances), in solid form, excluding products intended for medical and pharmaceutical use. Both categories are subject to an excise duty of €156.7 per kilogram.

Moreover, “nicotine pouches” are also defined as a new excisable product category: a manufactured product, which does not contain tobacco, is intended to be taken orally, without inhalation and without a heating or combustion process, and which contains nicotine (or nicotine substrate) and other substances, in solid form, excluding products intended for medical and pharmaceutical use. Nicotine pouches are subject to an excise duty of €50 per kilogram. The standard VAT rate in Greece is 24%.

References:

  1. https://www.yomiuri.co.jp/economy/20231212-OYT1T50109 ↩︎
  2. Tax bill: Imposition of excise duty on non-tobacco products | Proson ↩︎

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