There is no smoke: nicotine-free vapes may be subject to excise duty
The authorities are considering the possibility of introducing an excise tax on nicotine-free vapes by analogy with nicotine-containing products, Izvestia found out. If the initiative is adopted, additional budget revenues may amount to about 50 billion rubles a year, but this will lead to an increase in the cost of products, experts say. At the same time, they note that, despite the harm of nicotine-free electronic devices, first of all, a complete ban should be imposed on nicotine-free devices. Izvestia understood how this market works now.
The potential size of the nicotine-free vaping market
The issue of amendments to Article 181 of the Tax Code, providing for the introduction of an excise tax on nicotine-free liquids for electronic nicotine delivery systems (EDS), is scheduled for the third quarter of 2026. This is stated in the materials of the State Commission for Combating Illicit Trafficking in Industrial Products. The measure is being worked out by the Ministry of Finance, follows from a letter from First Deputy Finance Minister Irina Okladnikova to the Ministry of Industry and Trade. The documents were reviewed by Izvestia.
"This is not so much about the introduction of an excise tax on nicotine—free liquids for medical devices, but rather about building a system designed to block one of the most vulnerable channels of income loss," Dmitry Tortev, a member of the expert council of the State Duma Committee for the Protection of Competition, told Izvestia.
Formally, liquids for ESDS are already excisable goods, the expert specified. The rate in 2026 is 49 rubles per 1 ml, after a sharp increase of 110% in 2024 (to 42 rubles) and subsequent indexing.
— However, the key condition in the Tax Code is the term "nicotine—containing". In accordance with Article 181 of the Tax Code of the Russian Federation, liquid with a nicotine content of 0.1 mg/ml is considered excisable. Anything below this threshold or does not contain this substance at all is automatically exempt from taxation," Dmitry Tortev explained.
According to him, manufacturers have taken advantage of this loophole — they remove this substance from the composition and the product, intended for exactly the same devices, ceases to be excisable. As a result, the production of legal nicotine-containing liquids, according to the expert, has decreased to almost zero, while the number of vaping consumers has not significantly decreased.
Izvestia sent requests to the Ministry of Finance, the Ministry of Industry and Trade, as well as to manufacturers of vapes.
According to NeoAnalytics, by the end of 2024, the volume of the Russian e-cigarette market exceeded 250 billion rubles.
— The share of nicotine-free products in the Russian market of liquids for injection molding machines can reach about 40-60%. That is, this segment accounts for 70 to 120 billion rubles of annual turnover. If we apply to this volume an excise tax rate comparable to nicotine—containing goods — 49 rubles per 1 ml — the potential budget revenues can amount to tens of billions of rubles, - said Dmitry Tortev.
In 2025, excise taxes on tobacco and nicotine-containing products have already brought 1.5 trillion rubles to the budget, at the same time an excise tax was introduced on such raw materials, said Stanislav Naumov, Deputy Chairman of the State Duma Committee on Economic Policy.
"The inclusion of nicotine—free liquids in the list of excisable goods closes the last major gap in this design," he said.
If the withdrawal of this part of the market from the shadows is successful, the increase in excise revenues from non-nicotine products may amount to 50 billion rubles in annual terms, the parliamentarian estimated. However, another effect of the measure may be an increase in the price of the total cost of products, Dmitry Tortev added.
The budgetary effect of the measure under consideration will be positive, but limited: despite the noticeable volume of the market, a significant part of it is already in the shadows, so additional revenues are likely to amount to tens of billions of rubles a year, and not comparable to revenues from tobacco products, says Yaroslav Kabakov, Director of Strategy at Finam IC.
— For consumers, this will almost inevitably lead to higher prices, as excise taxes are shifted to the final cost. Depending on the rate, the price increase may be in the order of 10-30% or higher, especially in the mass segment," the analyst said.
At the same time, some of the demand may shift to the illegal segment, where prices are lower, but there is no product quality control. As a result, according to the expert, the final effect will be a compromise: a moderate increase in budget revenues is possible while reducing the legal market and increasing shadow turnover.
What other restrictions can apply to vapes?
The Laffer curve, a theoretical model describing the relationship between the tax rate and budget revenues, is regularly mentioned in discussions about the adjustment of the tax system. As noted by economist Dmitry Prokofiev, an increase in rates does increase fees to a certain level, but after the inflection point, further growth leads to lower incomes due to the withdrawal of some taxpayers into the shadows.
At the same time, relevant departments are considering, among other things, a complete ban on the production, import and turnover of electronic cigarettes, a source in government agencies told Izvestia. As reported by State Duma Chairman Vyacheslav Volodin, in May, deputies plan to consider an amendment that will give regions the right to ban the sale of vapes on their territories. At the same time, a complete ban may primarily affect more harmful nicotine-containing electronic devices, Dmitry Tortev suggested, although the question of what kind of regulation awaits vapes in the Russian Federation remains open.
Experts warn of the potential health risks associated with the use of electronic cigarettes, including the so-called popcorn lung disease, in which the alveoli are affected and respiratory failure develops. Separate studies also indicate that even nicotine-free e-cigarettes can have a negative effect: steam can cause oxidative stress in the lungs, leading to inflammation and cell death. In people with chronic diseases of the respiratory system, this can lead to an exacerbation of symptoms.
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