The changes being processed in the Excise Duty Act assume that from July 2025, vaping devices are to be subject to excise duty of PLN 40 per unit, as a result of which their retail price will increase to approximately PLN 80. In the following years, drastic increases in taxation of e-liquids are also planned. - All this will eliminate e-cigarettes and vaping products from the market in favor of traditional cigarettes and large tobacco companies at the expense of domestic SMEs - assesses Maciej Powroźnik, president of the Association of Employers of the Vaping Industry.
- In Poland, traditional cigarettes are smoked by around 8.5 million people, who smoke around 50 billion pieces per year, or around 2.5 billion packs. Looking at hard sales data, traditional tobacco products constitute the majority of the market, and vaping products have only around 4.5-5 percent of the market. And yet, the state's attention is focused on this one category, which has been treated quite brutally for over a year now - Maciej Powroźnik tells the Newseria agency.
In recent years, in addition to traditional tobacco products, more and more vaporization devices have appeared on the market, such as electronic cigarettes, in which a liquid containing nicotine (e-liquid) is vaporized, and heaters used to consume innovative products without burning them. Such products - due to their attractive forms, colors, wide range of flavors and nicotine concentrations - are becoming increasingly popular among consumers. According to data from the Ministry of Health, the number of entities introducing them to the Polish market is also growing rapidly: in 2020, 87 entities reported to the Office for Chemical Substances, in 2021 - 266, in 2022 - 1,558, and in 2023 - 4,430 entities. The largest part of the market is imported disposable electronic cigarettes - according to MF estimates based on data from customs declarations, in 2023 approx. 53.8 million such devices were imported to Poland.
Vaporization devices have not been subject to excise duty so far – this tax was paid only on what was heated or absorbed in them (innovative products, cigarette liquid). However, the Ministry of Finance wants to change this, hence the draft amendment to the Excise Duty Act and the Fiscal Penal Code Act (UD139 draft) is currently under consideration, which concerns the taxation of single-use and reusable vaporization devices. After the change in regulations, they will be considered non-harmonized excise goods and subject to a flat rate of PLN 40 per item. The draft regulations are to enter into force on April 1, 2025 and will apply from July 1, 2025.
- The UD139 project, another project of changes to excise tax regulations, is already very controversial in principle, because it introduces a solution that has no equivalent in practically any civilized market, and certainly not in Europe. This is an attempt to tax vaping devices with a rather drastic rate of around PLN 40, the amount of which has not been justified by anything and we do not know what it results from. In practice, a disposable e-cigarette, which today costs around PLN 30, will cost PLN 80 after the increase, because in Poland VAT is also charged on excise tax. This will de facto close the market for one of the nicotine products - assesses the president of the Association of Employers of the Vaping Industry.
In addition, the recently adopted amendment to the Excise Duty Act will introduce, among other things, tax increases on e-liquids for vaping. The excise duty rate is to increase by 75% next year, by 50% in 2026 and another 25% in 2027. In practice, these changes mean an increase in the excise duty on e-liquids from the current level of PLN 0.55/ml to PLN 0.96/ml next year, to finally reach PLN 1.8/ml in 2027. A 10 ml bottle of e-liquid will then be subject to a tax of PLN 18, which will be a 327% increase compared to 2024.
As indicated by The Independent European Vape Alliance (IEVA), the tax rate of PLN 1.8/ml will be the highest excise tax on e-liquids among European Union countries. Additionally, imposing an excise tax on vaping devices of PLN 40 (PLN 49–50 with VAT) will make vaping products even more expensive. The retail price of devices will increase to around PLN 80, which will be the highest rate in Europe. For comparison, after the excise tax increases, the price of traditional cigarettes will increase from around PLN 20 to PLN 25.
- When one category, vaping products, is eliminated from the market, it will probably be replaced by regular cigarettes. And here we have a difference in that these traditional products are offered by huge tobacco companies, while vaping products are the domain of Polish, local small and medium-sized enterprises. That is why we do not really understand why the regulations designed by the Ministry of Finance are aimed at domestic SMEs, and their beneficiaries will be international companies - says Maciej Powroźnik.
As he emphasizes, the changes in excise duty will hit the financial condition of Polish SMEs in the tobacco industry hard. According to IEVA calculations, even if entrepreneurs decide to adapt to the new regulations, in the case of an attempt to introduce 100,000 products to the market per month and with an excise duty rate on vaporization devices of PLN 40 (approx. PLN 50 with VAT) - they will have to have an additional PLN 5 million in total. With a payment term of 90 days, the demand for cash will increase to PLN 15 million. Many companies will not be able to cope with this. Importantly, the Ministry of Finance is aware of this - the assessment of the effects of the regulations took into account the fact that many companies in the industry will be forced to close, and companies should change their industry or find other markets for their operations.
– The Polish vaping industry is basically made up exclusively of small and medium-sized, domestic enterprises that import and distribute such products. And the new regulations will, in the short term, lead to the disappearance of about 1,000 companies employing over 12,000 people – predicts the president of the Association of Vaping Industry Employers.
Polish SMEs operating on the tobacco market indicate that the changes to the regulations being processed lack a comprehensive analysis of the economic effects. Another problem is that the pace of legislative work is fast, which makes it impossible to conduct reliable public consultations. The industry believes that this once again calls into question the quality and predictability of the law being established in Poland.
- The pace of the project regarding additional excise duty on vaping devices is very fast. We had only seven days to submit our comments on this project, good practices require a slightly longer period. There was also no so-called consensus conference, where all directly interested parties would have the opportunity to discuss with the author of the project and explain their arguments. We feel extremely uncomfortable with the fact that such solutions - and very drastic ones - are being implemented without discussion with the interested parties - says Maciej Powroźnik. - Right before the elections, commitments were made regarding the stability of the law for entrepreneurs and that tax regulations would not enter into force within a period shorter than six months from the date of their adoption. And now both of these principles have been broken, because the planned changes are very profound and are to enter into force next year.
The Ministry of Finance explains that the planned changes are aimed at limiting the affordability of vaporization devices and protecting public health – especially minors, for whom they may be the first step towards consuming other tobacco products and developing addictions.
- They will certainly not bring the expected effect when it comes to public health and access to such products by minors. There is already a ban on the sale of cigarettes, tobacco heaters or vaping products to minors, and yet they can freely buy them on the black market. Introducing additional bans will not really change this situation in my opinion - the expert assesses.
As he says, it will also be difficult to achieve the fiscal goals assumed in the project. The Ministry of Finance has assumed that in the first year of the new regulations, budget revenues will amount to approx. PLN 81 million (including VAT due on excise duty), and in subsequent years – approx. PLN 414 million. However, the assumed declines in sales of disposable e-cigarette vaporization devices will in practice mean that fiscal revenues should rather fall – especially since consumers may give up vaping in favor of products obtained illegally in the grey zone. The black market in Poland already accounts for as much as 50 percent of e-liquid consumption, and this indicator may increase rapidly if the current proposals for changes in excise duty come into force.
– On November 27, the European Parliament discussed the recommendation to limit the areas where tobacco smoking and vaping products can be used. During subsequent votes, a very clear distinction was made between vaping and smoking. It is not the same, despite the somewhat misleading name “electronic cigarette”, because in the case of vaping we are not dealing with combustion at all. In Brussels, the view that vaping is an effective tool for reducing the risk of health complications associated with smoking is heard. In Poland, not only do we not discuss this topic from the perspective of public health, but the discussion has quite unexpectedly, since the middle of the year, moved to the ministry responsible for taxes – emphasizes Maciej Powroźnik.
Source：https://biznes.newseria.pl/news/95-proc-urzadze-do,p323536123
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