Vaping blitz an $800m 2022 budget lift

Health Minister Mark Butler is preparing to impose tough new rules on the thriving black-market vaping industry.

Around 1.1 million Australians use vaping products, which is projected to increase.

Health Minister Mark Butler is preparing to impose tough new rules on the thriving black-market vaping industry, as a new cost-benefit analysis reveals regulating products could deliver an $800m budget windfall.

After discussions with state and territory counterparts, Mr Butler attacked the Morrison government for “dropping the ball” on vaping and flagged bolstering the regulatory framework around e-cigarettes and vaping products.

“The rate of young Australians aged 18-24 who reported using e-cigarettes nearly doubled, from 2.8 per cent in 2016 to 5.3 per cent in 2019,” he told The Australian.

“Our government is concerned about the increased marketing and use of e-cigarettes, particularly among young people.”

Mr Butler said Labor had a “proud history” of implementing anti-smoking policies; it passed world-leading plain packaging laws through parliament in 2012.

The crackdown comes as a new cost-benefit analysis found licensing vaping products in Australia would help the government raise more than $800m over four years through GST alone, with a tobacco-style excise delivering even bigger budget savings if new regulations are imposed to stamp out the black-market industry.

The report by London-based economic firm Llewellyn Consulting on legalising vaping products in Australia has found licensing retail products would generate $200m extra revenue per year.

The Morrison government’s failure to establish effective regulations for nicotine vaping, including e-cigarettes, nicotine pods and liquid nicotine, has seen an explosion in the number of vaping products purchased online and at corner stores.

Under current rules, which are being ignored by users including teenagers, individuals can import vaping products following consultation with a GP but the take-up of prescriptions has been low.

After pushback from Coalition MPs in 2020, former health minister Greg Hunt was forced to dump plans to enforce $200,000 fines on importers of nicotine vaping products without a medical prescription.

The number of Australians vaping is now at levels similar to New Zealand, Britain and France, where products are legal and regulated. Around 1.1 million Australians use vaping products, which is projected to increase.

“These illicit markets have grown enormously. In the process they deprive both the government and legal market operators – including the retail sector – of revenue,” the report said.

With the federal budget facing unprecedented pressures, the report, commissioned by British American Tobacco, recommends a similar approach to regulation of tobacco products through a combination of GST and excise tax.

“Continuing to increase tobacco excise rates by wage inflation, as currently legislated, combined with legalising nicotine vaping product sales, would be the path most likely to optimise government tax revenues,” it said.

Regulation would also “bear down on the growth in illicit tobacco consumption and bring large and growing illicit vaping product sales into the legal net”.

Tobacco taxes in Australia – historically considered a reliable source of revenue – are among the highest in the world, with the federal government raising $13bn, or 2.5 per cent of total tax, from tobacco excise receipts in the last financial year. In recent years, as more Australians shift to vaping or quit smoking, the tax take from tobacco excise has declined by billions of dollars.

In June, state health ministers used a national meeting to push Mr Butler for stronger action to clamp down on vaping after a research paper warned younger Australians were using e-cigarettes as a precursor to smoking cigarettes. The paper said the proliferation of electronic nicotine delivery systems had driven a “rapid increase in vaping among adolescents and young adults”.

Australia’s top health and medical research body in June gave a stark warning about the dangers of e-cigarettes, with a review of evidence surrounding the technology finding vaping was not an effective cessation tool.

The National Health and Medical Research Council found vapour from e-cigarette devices could “clearly” be harmful with “limited evidence” vaping was effective at helping smokers quit.