E-cigarettes take bite out of Manitoba's tobacco tax revenues

The Manitoba government raised tobacco taxes by $1 per carton in last week's budget, but is still expecting tobacco tax revenues to drop by about 12 per cent from last year.

Barry Draward, an assistant deputy minister of finance, says the main reason for the drop is people switching from tobacco to electronic cigarettes.

The battery-operated e-cigarettes are not subject to tobacco taxes and are used by some people as a nicotine-free alternative.

But others use them with nicotine cartridges, to get the same nicotine hit as a regular cigarette without the smoke or tobacco.

Draward says the jury is still out as to whether e-cigarettes are an alternative form of tobacco cigarettes or a stop-smoking aid, and there may be tax implications.

"It would be a health [department] decision, regardless," Draward said. "If they're saying it's a cigarette replacement, then, in my opinion, we've got to tax it, but we don't know that yet."

Manitoba has among the highest tobacco tax rates in the country. At 29.5 cents per cigarette, it's almost half the price of the product.

E-cigarettes and their flavoured cartridges are subject only to the eight per cent provincial sales tax.

Products that are designed to help people stop smoking, such as nicotine patches or gum, are tax-exempt.