Taxing e‐cigarettes would be a mistake in the fight against smoking

cigs as a nico ne prod‐ uct that should be taxed for reasons of symmetry: if tobacco is heavily taxed, then other nico ne‐delivering items should be taxed like‐ wise. Poli cians of eve‐ ry stripe clearly wish to avoid being seen as en‐ couraging nico ne con‐ sump on. However, according to many spe‐ cialists, the poten al benefits of e‐cigs in the fight against smoking may be quite significant. In the debate on e‐cig taxa on, public health consider‐ a ons seem to be ge ng pushed aside, with a focus instead on tax revenues. But taxing e‐cigs with the aim of offse ng tax losses from lower tobacco use could have impacts on public health. Hence the need to think clearly about how the tax tool could be used, taking both public health and tax revenues into ac‐ count. In short, France may be at a turning point in tobacco consump on pa erns, and any special taxa‐ on on e‐cigs could compromise progress in the fight against smoking. WHAT JUSTIFIES BEHAVIOURAL TAXATION? There is nothing new about indirect contribu‐ ons applied to certain substances (tradi onally alcohol and tobacco) to control their use. But taxes that rely on prin‐ ciples of behavioural taxa on are interfering increasingly with the lives of French people. Recently, drinks containing added sugar and sweeten‐ ers, as well as energy drinks, have ended up being taxed. The arguments tradi onally advanced to jus fy behav‐ ioural taxa on rely on the no on of “externality”, meaning costs involuntarily borne by others. Smoking is a perfect case in point. Cigare e smoke may disturb people in the vicinity of a smoker, and they are not necessarily taken into account in the decision to smoke. A tax on cigare es would lessen consump on and would lead smokers to act in a way that considers the externality they create by smoking. The same ar‐ gument applies over me: smoking may cause health problems in the long term, at significant cost to tax‐ Taxing e‐cigarettes would be a mistake in the fight against smoking IEM’s Economic Note • SEPTEMBER 2015