05/05/2015 11:22 EDT | Updated 05/05/2016 05:59 EDT

Manitoba Tobacco Tax Revenues Predicted To Drop Thanks To E-Cigarettes

Justin Sullivan via Getty Images
SAN RAFAEL, CA - JANUARY 28: Rhiannon Griffith-Bowman smokes an E-Cigarette at Digital Ciggz on January 28, 2015 in San Rafael, California. The California Department of Public Health released a report today that calls E-Cigarettes a health threat and suggests that they should be regulated like regular cigarettes and tobacco products. (Photo by Justin Sullivan/Getty Images)

WINNIPEG - Electronic cigarettes are taking a bite out of Manitoba's tobacco tax revenues.

The provincial government raised tobacco taxes by one dollar a carton in last week's budget, but is expecting tobacco tax revenues to drop by about 12 per cent from last year.

Barry Draward, an assistant deputy minister of finance, said 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 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 could 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."

But Jodee Mason, a spokeswoman for Finance Minister Greg Dewar, said the province is not going to raise taxes on e-cigarettes.

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.


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