(Yicai Global) Oct. 26 -- China will introduce a consumption tax for vaping devices from November, as part of a series of measures the government has taken in the past year to bring the burgeoning new sector more in line with that of traditional tobacco products.

The import and manufacturing of e-cigarettes will be taxed at a rate of 36 percent and wholesale distribution is set at 11 percent, the Ministry of Finance, General Administration of Customs and the State Taxation Administration said yesterday. This is still less than that of tobacco cigarettes which are taxed at a composite rate of 66.6 percent.

E-cigarettes are being taxed at a rate just under that of Class-B rolled cigarettes, so there is still room to hike taxes, said Xie Zongbo, an Australian-based accountant and financial author. Previously vaping devices had only been subject to Value Added Tax in China.

The new rules, though, encourage exports as manufacturers will be eligible for tax rebates and exemptions should they sell their vaping devices overseas. This is good news for the industry as over 70 percent of China’s 1,500 e-cigarette makers focus on exports.

China’s export value of vaping devices is expected to jump 35 percent this year from the year before to USD25.7 billion, according to the 2022 bluebook for e-cigarette exports released by the China Electronics Chamber of Commerce. And the size of the global vaping market should top USD108 billion this year.

But the big jump in taxes will greatly increase production and operational costs and as a result the price of e-cigarettes is going to rise, which will suppress domestic demand, Xie said. The tobacco sector is subject to high taxes due to the huge negative impact on people’s health.

Several shop owners that sell e-cigarettes told Yicai Global that they have not been notified of any price hikes yet.

Editors: Shi Yi, Kim Taylor