British American Tobacco chief embraces new UK vape tax

The chief executive of British American Tobacco has endorsed the UK’s plans for a vaping tax, claiming the cigarette maker has learned to “love regulation”.

Asked if he endorsed a vaping duty, BAT chief executive Tadeu Marroco told the Financial Times: “I think that could be a good idea, I think that we need more regulation”.

“A lot of people confuse that we are an industry that hates regulation, that’s exactly the opposite: we love regulation,” he added.

Chancellor Jeremy Hunt is set to unveil a new duty targeting vapes, which are already subject to value added tax, in his Spring Budget on Wednesday. The move is an effort to make the devices less affordable for young people following a recent spike in underage uptake.

The new rate of tax will vary according to the nicotine content of e-cigarettes, according to proposals seen by the Financial Times.

Any increase in tobacco duty will be higher for cigarettes than for vapes to ensure that the 4.7mn British adults who vape are not incentivised to return to smoking, according to a Treasury official.

A vaping tax would allow the government to exercise “better control” of the industry, said Marroco, who claimed that illegal products comprised up to a third of the UK vaping sector and are likely stealing market share from BAT.

BAT’s Vuse vaping product has faced stiff competition from Chinese-owned brands Elf Bar and Lost Mary in drawing UK vapers.

Ministers this year announced plans to ban single-use vapes and restrict the flavours, which have been blamed for causing a sharp rise in underage vaping. The ban is expected to take effect in April 2025.

Dozens of US states and several European Union countries including Belgium and Portugal have already introduced duties on e-cigarettes. The European Commission has previously proposed an EU-wide vaping tax but its implementation has been delayed.

Marroco said he would like to see a “modest” vaping tax introduced, adding the duty “needs to be aligned with the risk continuum” and therefore “taxes cigarettes more and vapour much less”. Rival cigarette maker Imperial Brands has also endorsed a vape tax.

According to the proposals, the chancellor will announce a three-tiered vape tax aimed at reducing the affordability of vapes for underage users — it is illegal to sell vapes to anyone under the age of 18.

The tax is unlikely to be introduced before October 2026, allowing time for a consultation on the policy to be carried out.

About a fifth of children aged between 11 and 17 had tried vaping as of 2023, up from 14 per cent in 2020 before the first Covid-19 lockdown, according to Action on Smoking and Health, a public health charity.

Non-nicotine vape liquid will be taxed at £1 per 10ml, according to the draft plans. Liquids with the equivalent nicotine content of one cigarette or less will face a tax rate of £2 per 10ml, while vape fluid with more than a cigarette taxed at £3 per 10ml.

Vaping products are already subject to a 20 per cent VAT tax rate, while pharmaceutical products designed to stop people from smoking face a lower VAT rate of just 5 per cent.

The chancellor is also expected to raise cigarette duty for the second time in half a year, according to people familiar with the plans. At the Autumn Statement in November, Hunt increased tax on all tobacco products by 2 percentage points above the retail prices index, apart from hand rolling which increased by more.

A Treasury spokesperson declined to comment.