The German association for the e-cigarette trade, VdeH, has sharply criticized the passage by the financial committee in Parliament of a tobacco tax reform bill that calls for significant tax hikes on vapor and tobacco-heating products, including nicotine-free variants.
Until now, e-cigarettes have been subject only to value-added tax. Tobacco-heating products will reportedly be taxed at the same level as combustible cigarettes.
The plans will not only boost the black market but also destroy numerous small and medium-sized businesses, according to VdeH.
“The mere fact that e-cigarette liquids are generally taxed more heavily than tobacco cigarettes and thus ignore the 95 percent lower potential for damage is insane health policy,” said VdeH Managing Director Michal Dobrajc in a German-language statement. Taxing nicotine-free products as well as cigarettes defies common sense, he added.
If you are serious about reducing the smoking rate, then you have to support the industry that is making a significant contribution to reducing it instead of destroying it.
Dobrajc said Germany should learn from the experience of other countries that were forced to lower their vapor taxes as vapers returned to smoking and anticipated revenues failed to materialize.
“The Tobacco Tax Modernization Act is a disaster in both health and economic terms,” said Dobrajc. “If you are serious about reducing the smoking rate, then you have to support the industry that is making a significant contribution to reducing it instead of destroying it.”
A court ruling allows German e-cigarette retailers and manufacturers to tell customers that vaping is less unhealthy than smoking.
By Stefanie Rossel
In Germany, the concepts of tobacco harm reduction (THR) and relative risk haven’t quite arrived yet. Several representative surveys show that more than half of the population, especially smokers, mistakenly believe that e-cigarettes are at least as hazardous to health as combustible cigarettes. But perhaps things will get better: A recent court ruling allows vapor companies to set the record on e-cigarettes straight in their communications with consumers.
In February 2021, the Koblenz higher regional court cleared the way by overturning a May 2020 ruling by the Trier District Court. The case originated with a campaign to convert smokers by a Trier e-cigarette retailer, Michal Dobrajc, who is also executive chairman of German e-cigarette association Verband des e-Zigarettenhandels (VdeH). In mid-2019, Dobrajc placed billboards with the slogan “E-Ziga retten Leben—jetzt umsteigen.” The catchphrase is a pun on the German verb “retten” (to save) and means “E-cigarettes save lives—switch now.”
The German center for protection against unfair competition considered this misleading advertising and sued Dobrajc. The center argued that the advertisements suggested that e-cigarettes were harmless and that switching would save smokers’ lives. It argued that the campaign could convince nonsmokers that vaping products didn’t present health risks. The Trier District Court found in favor of the plaintiff and ordered Dobrajc to cease advertising with the slogan.
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Dobrajc appealed, and the Koblenz court came to a different result. The catchphrase, the court noted, did not contain any incorrect statements regarding the main characteristics of the advertised products. The advertisements were therefore neither misleading nor unfair. What’s more, plenty of scientific studies documented that e-cigarettes had a significantly less harmful effect on health than combustible cigarettes, the Koblenz court said.
Assigning a life-saving effect to a product is justified when the advertised alternative product has a less hazardous influence on the human body than a conventional cigarette, the court claimed. If consumers switched to e-cigarettes, a decrease of the hazardous impact caused by combustible cigarettes was to be expected, an effect that fundamentally has the potential to decrease the number of severe diseases that could also lead to death.
The “Switch now” campaign, the court further argued, did not encourage nonsmokers to start vaping but was clearly directed at current smokers. The target group of the advertisement, the court found, was sufficiently clear. The court did not permit an appeal.
The recognition of e-cigarettes as a less hazardous product by a higher regional court is a milestone as it confirms the reduced risk and explicitly allows such statements as based on scientific evidence.
Dobrajc welcomed the ruling. “The recognition of e-cigarettes as a less hazardous product by a higher regional court is a milestone as it confirms the reduced risk and explicitly allows such statements as based on scientific evidence,” he said. The ruling, however, has no effect on existing or planned advertising bans for e-cigarettes as products, he adds. “These can’t be advertised in Germany anymore, for example in print media or on the internet, and billboard advertising will soon be banned too.”
The ruling is nevertheless a positive development because it enables retailers and manufacturers to use advertising to highlight the reduced risk inherent to vape products. “The VdeH will continue to educate society and politics with independent scientific evidence on the chances of harm reduction,” says Dobrajc.
“Especially with a view to envisaged regulatory measures such as taxation of e-cigarettes [see sidebar] and the revision of the European Union’s Tobacco Product Directive, it is vital that politicians in particular comprehend the chances and listen to science. Every excessive regulation will impact on the perception of the population: ‘If something is particularly strictly regulated or highly taxed, it must be especially harmful for me,’” he notes.
“Our influence as an industry association is limited, but there must be a development that public authorities and especially the media turn away from their often dogmatic views characterized by personal ideology and start to inform in a differentiated and objective manner about e-cigarettes as a product. It’s the only way to bring about a turnaround in the perception of consumers, and we need to place a greater onus on politicians and the media.”
No sin tax for no-sin products
The German e-cigarette association Verband des e-Zigarettenhandels (VdeH) recently drew attention to the unintended consequences of a controversial vapor tax bill with an unusual initiative.
In March, Germany’s ruling coalition, largely driven by the social democratic SPD, proposed a tax on vape products and heated-tobacco products (HTPs) as part of a tobacco tax modernization initiative. The new tax would triple e-liquids prices from the current €5 ($6.03) per 10 mL bottle, making the products more expensive than conventional cigarettes. Germany’s finance ministry expects the measure to generate several hundreds of millions of euros in tax revenue per year.
On a huge screen in front of the Reichstag building, which houses Germany’s Parliament, de VdeH projected imagery depicting former smokers’ experiences with e-cigarettes and scientists’ findings on the products’ harm reduction potential.
VdeH Executive Chairman Michal Dobrajc called the planned tax a disaster in terms of health policy. “Studies have shown that the tax has no relevance for the protection of youths as prevalence of e-cigarette use has been at a consistently low level for years,” he said. “As a result of the horrendous price increase, consumption of adult consumers is expected to shift back to the much more hazardous combustible cigarette, according to a recent survey.
“Besides, it is also likely that no significant additional tax revenue will be generated but that jobs will be destroyed, and a lucrative black market will be created. German customs called the planned tax ‘a startup for criminals’ and ‘a stimulus package for smugglers.’ It is incomprehensible that valuable experience from other countries in this regard is being ignored and that Germany is attempting a solo run while at the same time consultations for a harmonization of e-cigarette taxation are taking place on European Union (EU) level and are intended to be finalized by 2021,” said Dobrajc.
Dobrajc cited Italy as an example of what happens when a country sets its vapor taxes too high. In 2014, Italy became the first EU country to tax e-liquids. And while its rate was only half of what Germany is envisioning, it turned out disastrous. Many vape shops closed while the black market flourished. In 2018, the government felt compelled to slash its vapor tax by 90 percent. Italy had collected only one twentieth of the tax it anticipated. Estonia and Hungary had similar experiences. Germany’s intended tax would be fivefold the EU average.
“With still 11 million smokers in Germany, the e-cigarette is the biggest health opportunity we have. We must take advantage of it. Every tax has a steering effect,” Dobrajc said. “But if this drives consumption back in the direction of the significantly more dangerous combustible cigarette, something is going completely wrong. Making e-cigarettes unattractive through a tobacco tax is like taxing green electricity like gasoline.” Taxation of vape products and HTPs, Dobrajc explains, should be based on scientific evidence and consider products’ relative risk profiles.
The projection in front of the Reichstag complemented the VdeH’s regular talks with parliamentarians in which the association seeks to convey knowledge about vape products. “Interest is growing,” noted Dobrajc. “An increasing number of politicians understand the context and set straight their perceptions of vape products and their health protection potential. As politicians attach more importance to scientific evidence, resistance against the draft law increases across all political groups. The parliamentarians think carefully whether they want to take on responsibility for an experiment at the expense of the health of millions of smokers.”
Dobrajc believes the initiative in Berlin has achieved its objective. “With the event, we showed that there is serious resistance against the bill and that our industry is looking for dialogue. And exactly this dialogue took place: During our demonstration, many parliamentarians were leaving the building, and we were able to have constructive exchange with them. This way we could also reach politicians who previously had perhaps not taken our written information into account.”—S.R.
Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.
Germany’s planned e-cigarette tax is a health policy disaster that will destroy jobs and boost black market sales without generating significant additional revenues, according to the country’s e-cigarette trade association VdeH.
Under the plans, e-liquids will attract a tax of €4 per 10 mL bottle from July 1, 2022. On Jan. 1, 2024, the tax will increase to €8 plus VAT, i.e., €9.52 per 10 mL bottle. Based on an average sales price of about €5 per bottle, this amounts to a tripling of the retail price, says VdeH.
On April 21, the VdeH plans to protest the plans by projecting statements from scientists and consumers supporting its position on a 20 x 35 meter “hydro shield” at the Reichstag waterfront in Berlin.
“The planned excessive taxation means that the 95 percent less harmful e-cigarette will soon be more expensive than conventional cigarettes,” says Michal Dobrajc, managing chairman of the VdeH, in a press note. “With 11 million smokers still in Germany, the e-cigarette is the greatest health policy opportunity we have—we must use it. The planned tax would have exactly the opposite effect.”
The tax plans, which fail to consider the expected market slump of 50 percent when calculating tax revenue, would take the level of vapor product taxation in Germany to five times the EU average, according to the VdeH.
The law would not only shift consumption back to more harmful tobacco cigarettes but also sacrifice the entire industry to the black market, the trade group cautions.
The German government has proposed a new tax for nicotine-containing vapor products, which would be effective in summer 2022.
The new tax is “a response to current market developments.” It would include a tax of €0.02 ($0.02) per mg of nicotine for e-liquids, effective July 1, 2022. Beginning Jan. 1, 2024, the tax would double by the end of 2026.
“This is appropriate for reasons of fair taxation since only nicotine-containing substances in e-cigarettes are to be regarded as substitutes for cigarettes,” the draft of the proposed Tobacco Tax Modernization Act states. Authorities are also justifying the decision based on the “existing risk potential” of vapor products compared to traditional tobacco products.
“They are not harmless consumer products and can cause serious illnesses,” the draft bill states.
Lawmakers expect the new tax to bring in €135 million in 2022 and up to €2.9 billion by 2026.
The German Alliance for Tobacco-free Pleasure (BfTG) says the plan “makes no sense.”
“The tax would make smoking cheaper than vaping and make e-liquids many times more expensive,” BfTG chairman Dustin Dahlmann told ECigIntelligence, warning that it could lead to a flourishing black market and a collapsing legal industry, such as in Italy and Estonia. The BfTG believes taxation should be left at the EU level.
Currently, vapor products are not specially taxed. They are subject to the 19 percent value-added tax, however.
Germany taxes $34.7 billion worth of tobacco products reports Xinhua, citing the country’s Federal Statistical Office (Destatis). This is an increase of 5 percent year-on-year.
The quantity of fine-cut rolling tobacco taxed last year increased by 10.6 percent. The quantity of pipe tobacco taxed rose 44.3 percent.
Covid-19 lockdowns and border closures played a role in the growth of fine-cut cigarettes. “In search of an alternative to the lower priced cigarettes from abroad, consumers probably increasingly turned to fine-cut to roll their own cigarettes,” stated.
Cigarette sales fell by 1.1 percent to 73.8 billion pieces. Taxed retail sales values for cigarettes rose 43.5 percent.
Juul Labs will withdraw from Germany at the end of the year, reports W&V, citing a company spokesman in Hamburg.
The company said it needed to set priorities in to be successful in the long term. “In this way one can invest in research and development and future products in core markets,” it stated.
German consumers will be able to purchase Juul products until stocks run out.
Following a wave of layoffs, Juul’s German subsidiary had only about a dozen employees left, which have now been terminated, as well.
Juul had already exited Austria this summer and plans to leave Switzerland soon.
The company, which enjoyed great success in the United States until a regulatory backlash, has found it challenging to crack the European market due to EU limits on nicotine.
Juul products sold in the EU contain significantly lower doses of nicotine than those on the U.S. market, making it difficult for them to compete against combustible cigarettes in Europe.
Recently, Juul was also forced to temporarily halt shipments in Germany because its packages were missing a mandatory recycling symbol.
Germany’s Upper House has approved legislation that will further restrict tobacco advertising, according to Xinhua.
The legislation will begin to take effect in 2021: Movies will not be allowed to advertise tobacco products and the distribution of free samples outside specialty stores will not be allowed. Beginning in 2022, outdoor advertising for conventional tobacco products will be banned. From 2023, the ban will include tobacco heaters, and in 2024, the ban will include e-cigarettes.
Germany is currently the only European Union country to still allow tobacco advertising in public spaces.
“Many studies prove that tobacco advertising increases the attractiveness of tobacco products, in particular among children and young people,” said Klaus Reinhardt, president of the German Medical Association.
The ban is aimed at protecting public health and the health of young people.
Authorities have arrested 12 individuals who ran a large illegal tobacco factory in Kranenburg, Germany. The illegal factory could produce 10 million cigarettes per week.
Around 200 officers were involved in the raid. The 12 workers arrested on site were all Polish and Ukrainian nationals, aged between 28 and 59 years old. 11 million cigarettes were also seized as they were being loaded onto a lorry.
This is the fourth such illicit production facility uncovered on the German territory and undoubtedly one of the largest. The estimated tax loss to the German state revenue for the illegal production alone stands at approximately €1.5 million ($1.77 million) per week, according to Europol, which estimated that the factory had been operating since the end of 2016.
Most of the cigarettes are believed to have been destined for the black market in the United Kingdom where the retail value of cigarettes is much higher than in Germany.
The operation was launched by the German authorities based on information provided via Europol by the Polish Police Center Bureau of Investigation. Europol further supported this operation by facilitating the information exchange between the involved authorities and by analyzing the operational data to identify the main targets.
The investigation is still ongoing to try to identify potential links to other European countries.
Germany will reduce its value-added tax (VAT) by three percentage points to 16 percent from July 1 until the end of 2020 as part of a massive stimulus package designed to offset the economic impact of the coronavirus pandemic.
While the VAT reduction will reportedly also apply to tobacco products, it remains unclear to what extent smokers will benefit from lower prices.
Tobacco companies will be able to pass on the discounted tax to consumers at the earliest in two to three months—assuming they want to do so at all.
This is because new prices require tobacco companies to purchase new tax stamps, the delivery of which takes about eight weeks. The manufacturers will also have to apply for new barcodes and print them on their products, which can take between two and three months, depending on the company’s resources.
According to experts, it is unlikely that dealers will be given new tax stamps for cigarettes that have already been produced and packaged.
The German government on May 22 announced plans to impose a complete tobacco product advertising ban that would go into effect from January 2022.
Although it is banned for the media, tobacco product advertising is still allowed at point-of-sale and in cinemas.
The proposed new law, which will be discussed in parliament next week, would also prohibit cigarette sampling and ban vapor product advertising beginning in 2024.
Consumer protection minister Julia Klockner said, “Limiting tobacco advertising on the street and in cinemas is long overdue.
Above all, we have to protect young people so that ideally they don’t even start smoking.”
