Some news, views and comments about everything and anything, relevant and irreverent.
If the modern alternative to smoking is supposedly healthier, why is vaping still vexating when it comes to vat on vapes?
For some it may be an anathema. For others it’s a critical step away from the long-acknowledged health risks of smoking. For the taxman, it’s just another source of revenue, and that’s making it just a little bit harder for retailers to justify switching to vaping to their customers.
If cigarettes kill, then shop keepers are murdering their clients one by one, which is hardly good for repeat business. However, if that death is a long, slow, lingering and highly taxed one, then you can be sure that the revenue will be interested in this equitable way to combine the certainties of death and taxes.
Now, there is a call to add still more complication to the shopping basket. One of the e-cigarettes manufacturers has called on the government to have VAT on e-cigs reduced to zero.
As you are surely aware, VAT is a bit of a drag, and not just for the tobacco industry. The headline rate of 20% does not apply universally, but some supposedly healthy options and necessities attract lower rates or no rate at all.
At first glance, it’s a bit of a smokescreen of random variances and exemptions. A child car seat, a fairly healthy option for younger passengers, is taxed at 5% vat; and for those maybe a little bit long in the tooth for driving, mobility aids for the elderly come in at 5% as well.
Being a bit more proactive however isn’t considered such a worthy cause. Want a tennis racket or other sporting equipment and you’ll still have to serve up 20% VAT. If that’s painful, well a massage isn’t going to help, with even the wholesome sort kneading your coffers for that extra 20%.
So, is it reasonable for vapers to see their purchases zero-rated for VAT? Manufacturers argue it is, and they puff up the findings of a report by think tank, the Institute for Economic Affairs. There, possibly in a smoke-filled room, they say that a lower duty on e-cigarettes would improve public health and consumer welfare. That presumably means we’re all forty-a-day types already, and bubbling away on one of those steam-powered flutes would reduce our risk of serious illness and dependence on the health services. Exchequer earns less in taxes, but pays out much less in healthcare. This, basically is what we in accounting circles call a profit, but hardly one we’d be comfortable making if the net result is still a premature death.
Still, all is not lost - for the taxman. As our friends in HMRC might point out, if they were in a particularly cynical mood, premature death does generate inheritance taxes. While fags and vapes are still taxed at 20% VAT, we say it’s interesting that stop smoking patches are already rated at 5%. Stick that in your pipe and smoke it, as we used to say in more brown ceilinged times.