Tuesday 23 August 2016 12:01 am

E-cigarette tax should be zero: IEA think tank

Excise taxes for e-cigarettes and other healthier alternatives should be set to zero, according to the influential Institute of Economic Affairs think tank.

In a report the group argues a lower tax on e-cigarettes would improve public health and consumer welfare.

The report author, economist Carl Philips, slammed policy makers for refusing to take into account “simple economics” when making decisions.

“Public health people are notoriously economically illiterate. Most of the nonsense in the policy discussion, on all sides, stems from ignoring economics,” said Phillips.

“Just because a choice has health implications does not eliminate the value of economic analysis. The concept of addiction only makes sense in the context of economics, so it is obviously not a reason for ignoring economic science.”

Around 2.2m people in the UK use e-cigarettes, which vaporise a nicotine-based liquid so that it can be inhaled.

Earlier this year a European Union directive laid out plans to bring e-cigarette taxes in line with other tobacco products.

The present excise regime means that duty must make up at least 57 per cent of the retail price of a packet of cigarettes.

VAT makes up 20 per cent, taking the total tax burden to at least 77 per cent. E-cigarettes are subject to 20 per cent VAT with a cartridge costing between £1.50 and £5 and roughly equivalent to a £10 packet of 20 cigarettes.