Argentina Cigarette vs Vaping Tax Debate Benefits Local Tobacco Producer

Tobacco companies are intensely lobbying the government over proposed changes to cigarette taxes and the legalization of vaping products in the omnibus bill.

Foreign Firms Bet on Vapes While Top Local Producer Protects Tax Edge

Multinational tobacco corporations are advocating for vapes in Argentina, despite health concerns, while the leading domestic cigarette manufacturer fights to retain its tax advantage.

The “internal taxes” section of the omnibus bill introduces critical reforms, renewing the longstanding conflict between tobacco firms reflected across Argentina's cigarette sales outlets.

Lower Tax Rate Proposed for Vapes

Articles 189-198 adjust cigarette taxes and allow the 20% tax rate for “Electronic Cigarettes, Vapes and other authorized nicotine-delivery devices and cartridges.”

Tabacalera Sarandí, a local company that resisted the “minimum tax,” opposes the lower vapes rate which would benefit foreign companies interested in these products.

Health Risks of Vaping

Vaping has generated growing health worries due to escalated cardiovascular and lung disease risks, even among youth. Vaping can worsen gum illnesses, prompt oral cancer, cause breathing issues and lung damage comparable to asthma.

The World Health Organization classifies vaping like smoking given its adverse impacts. Regional bodies like the Pan American Health Organization have highlighted vaping bans in Latin American countries.

Battle Over Minimum Tax advantage

Another disputes is the bill's rise in cigarette taxes to 73% and elimination of a “minimum tax” imposed in 2017, except for Sarandí after winning injunctions, letting it quintuple its domestic market share to near 45%.

Sarandí argues the proposal favors multinationals, as it removes the tax edge and because Sarandí reports far lower prices than actual sales prices.

The original 2004 minimum tax aimed to boost collections and prevent evasion. Later laws retained the approach to disincentivize tobacco use, until 2017 reforms set fixed inflation-adjusted amounts, maintaining the rationale, which Sarandí legally challenged.

Tax Impact

Cigarettes face five taxes funding various programs and levels of government. High taxes suit public health efforts to deter tobacco consumption, backed internationally like the 1998 US tobacco settlement.

Still, article 198 cracks the door to potentially authorizing vapes, conflicting with the health priority.