Going down the taxation rabbit hole. (In Canada)

"You are going to make vaping more expensive than smoking"

That's pretty much the knee-jerk howl that comes out every time taxation gets brought up. Now I could go on about whether the product should be taxed at all, or my opinions on taxation based on relative risk, but frankly, no one would give a shiny wooden nickel for those thoughts.

So let's explore comparative pricing and determine at what point smoking "likely" becomes cheaper than vaping.

Trust me, that's going to be muddy enough, with plenty of assumptions, rounding errors, and confounders. This blog will drive Carl V. Phillips around the bend. However, it will give the average vape shop owner a rough idea of where the comparative price points are between the two disparate products. It will also give them an idea of how much a tax would cut into that "competitive pricing" freeboard.

"How many cigarettes are in a bottle of e-liquid?"

None, but that doesn't mean we can't come up with a rough equivalency for some dirty math.

It is tough to find data on how much nicotine is delivered by a cigarette. There is a difference between how much nicotine is contained in a cigarette and how much actually is delivered past the user's lips. Combustion isn't exactly a gentle and efficient process.

In 1992, Kaiserman and Rickert published "Carcinogens in Tobacco Smoke: Benzo(a)pyrene from Canadian Cigarettes and Cigarette Tobacco". While their target was the benzo(a)pyrene, they did measure the nicotine delivery from the smoking machine and it is referenced in table 1 of that paper.

For those that have heard me talk about how I figure out how to guestimate the appropriate nicotine level for a smoker looking to transition: this is where I got a base value of roughly 1 mg per cigarette smoked.

(and if the academics out there can point to a better data source that a grade 12 educated redneck can use, I'd be happy to adjust my process and charts)

 For taxation purposes, I actually ran 2 sets of calculations: 1 calculation at 1 mg delivered per cigarette and a second calculation at 1.5 mg because that would actually further disadvantage the vaping products, and that's the way I like to couch my bets.

"What's The cost per milligram delivered?

Again, this is tough to figure out. Tax implications for cigarettes and vaping products vary by jurisdiction and tax exemption status, and I have no idea what the black market is doing (I don't operate in the black market). 

Physicians for a Smoke-Free Canada tracks the average price of a 20 pack of cigarettes across Canada here: http://www.smoke-free.ca/SUAP/2020/taxrates.pdf

I knocked off the "Till Taxes" and left the excise taxes in. I used the 1.5 mg/cigarette and the 1 mg/cigarette values x 20 cigarettes per pack and divide up the price of a pack to get a "cost per milligram delivered. (Not absorbed, that's a whole different ball of wax).  

Then I used 4 common nicotine strengths (3mg/ml, 6mg/ml, 10mg/ml, and 20mg/ml) to figure out what the relative cost would be per ml to equate to an equal cost per mg delivered.

...and I came up with this:

"Those are some purdy colours, but what the **** does this mean to me?"

So you want to work out the pricing differential between vaping liquids and cigarettes for your customer. you take the price of the bottle of liquid you are selling and divide it by the volume of the bottle. (vape shops charge by volume, not nicotine concentrations).

My example: 

My shop in Alberta. 60 ml bottle of 3 mg/ml e-liquid at $25.00 is a base consumer cost of 0.42 cents/ml. 

Provincial excise tax? in Alberta that is currently 0

Now compare that to the charts and see whether it is higher or lower than the equivalency rate of 1.83/ml

Nova Scotia Example (same bottle - same price)

0.42/ml base cost + 0.50/ml provincial vape tax = 0.92/ml consumer cost. 

Compare to chart above.

BC example

BC gets a little bit uglier because the vaping tax is actually a modified PST applied at retail, but it can still be worked out. 

(Base cost x 1.2) / volume and compare to chart

Now you can figure out relatively quickly whether a proposed tax measure is likely to make vaping more expensive than smoking, and for which type of vaper (Low-Nic-High-Volume, or, High-Nic-Low-Volume)

Of course, that's all based on nicotine and does not account for "idle hands vapers", "Clouds-bro-clouds guys", or "flavour chasers". It also does not account for hardware costs. 

But it'll give you a rough and dirty idea.

__________________________

Cigarettes and vaping products are economic substitutes. All taxation has the ability to impact transition rates. However "Just say no" isn't likely to fly with the CRA or the provincial treasuries. 

Yes. That sucks.

No. I don't like it.

Life isn't fair.

Fight for lower tax points, you have better odds someone might listen.