ABSTRACT

This article provides a snapshot of the market structure and regulatory approaches around novel and emerging tobacco and nicotine products, both globally and in Latin America, with a focus on excise taxation. Using data from leading market research companies, the WHO Report on the Global Tobacco Epidemic 2021, and country laws and decrees, the article analyses the evolution and market structure of heated tobacco products (HTPs), electronic nicotine delivery systems (ENDS), and electronic non-nicotine delivery systems (ENNDS). This is followed by a summary review of regulatory approaches adopted by countries toward these products, with a particular focus on excise tax policies currently implemented. Based on the well-established knowledge about tobacco taxation best practices and on WHO’s recent recommendations on the taxation of novel and emerging tobacco and nicotine products, the authors then discuss possible elements of a good tax policy approach for countries to consider.

Keywords
Taxation of the tobacco-derived products; tobacco products; electronic nicotine delivery systems; health policy; Latin America

RESUMEN

En este artículo se presenta una sinopsis de la estructura del mercado y los enfoques regulatorios de los productos nuevos y emergentes de nicotina y tabaco, tanto en América Latina como a nivel mundial, con especial atención a los impuestos selectivos al consumo. Mediante datos de las principales empresas de investigación de mercado, el Informe OMS sobre la epidemia mundial de tabaquismo del 2021 y las leyes y los decretos de los países, en este artículo se analizan la evolución y la estructura del mercado de los productos de tabaco calentado (PTC), los sistemas electrónicos de administración de nicotina (SEAN) y los sistemas electrónicos sin nicotina (SESN). Además, se resumen los enfoques regulatorios adoptados por los países en lo relativo a estos productos, prestando particular interés a las políticas que se aplican actualmente con respecto al impuesto selectivo al consumo. Sobre la base de conocimientos bien consolidados sobre las mejores prácticas de tributación del tabaco y las recientes recomendaciones de la OMS sobre la tributación de los productos nuevos y emergentes de nicotina y tabaco, los autores presentan a consideración de los países los posibles elementos de un enfoque para abordar la política tributaria de forma satisfactoria.

Palabras clave
Tributación de los productos derivados del tabaco; productos de tabaco; sistemas electrónicos de liberación de nicotina; política de salud; América Latina

RESUMO

Este artigo fornece um retrato da estrutura de mercado e das abordagens regulatórias dos produtos novos e emergentes de tabaco e nicotina, tanto globalmente quanto na América Latina, com foco na tributação sobre o consumo. Utilizando dados das principais empresas de pesquisa de mercado, do Relatório da OMS sobre a Epidemia Global do Tabaco 2021 e de leis e decretos dos países, o artigo analisa a evolução e a estrutura do mercado de produtos de tabaco aquecido (HTPs, sigla do inglês heated tobacco products), sistemas eletrônicos de liberação de nicotina (ENDS, sigla do inglês electronic nicotine delivery system) e sistemas eletrônicos sem nicotina (ENNDS, sigla do inglês electronic non-nicotine delivery system). Segue-se uma breve revisão das abordagens regulatórias adotadas pelos países em relação a esses produtos, com enfoque especial nas políticas tributárias sobre o consumo atualmente implementadas. A seguir, os autores discutem possíveis elementos de uma abordagem adequada de política tributária a serem considerados pelos países, com base no conhecimento já bem estabelecido sobre as melhores práticas de tributação do tabaco e nas recentes recomendações da OMS para a tributação de produtos novos e emergentes de tabaco e nicotina.

Palavras-chave
Tributação de produtos derivados do tabaco; produtos do tabaco; sistemas eletrônicos de liberação de nicotina; política de saúde; América Latina

In the Region of the Americas, notable progress has been made in the understanding of the role of excise taxes—defined here as taxes that apply to a few selected commodities—on tobacco products as an instrument to reduce tobacco use and improve population health. This has been driven by an abundance of supporting evidence, including the effectiveness of tobacco taxes and tobacco demand analyses (¹1. Guindon GE, Paraje GR, Chaloupka FJ. The impact of prices and taxes on the use of tobacco products in Latin America and the Caribbean. Am J Public Health. 2018 Dec 1;108:S492–S502.); simulation modeling on the impact of tobacco taxes on price, sales, and revenue (²2. World Health Organization. The WHO Tobacco Tax Simulation Model: WHO TaXSiM user guide [Internet]. Geneva: WHO; 2018 [cited 2022 Jan 5]. Available from: https://apps.who.int/iris/handle/10665/260177
https://apps.who.int/iris/handle/10665/2... ); independent studies on the extent of illicit trade in tobacco products (³3. World Bank Group. Confronting illicit tobacco trade: A global review of country experiences [Internet]. Washington, DC: WBG; 2019 [cited 2022 Jan 5]. Available from: https://documents1.worldbank.org/curated/en/677451548260528135/pdf/133959-REPL-PUBLIC-6-2-2019-19-59-24-WBGTobaccoIllicitTradeFINALvweb.pdf
https://documents1.worldbank.org/curated... ); and comprehensive guidelines for the design and administration of tobacco taxes (⁴4. World Health Organization. WHO technical manual on tobacco tax policy and administration [Internet]. Geneva: WHO; 2021 [cited 2022 May 9]. Available from: https://www.who.int/publications/i/item/9789240019188
https://www.who.int/publications/i/item/... ). Yet, translation of the evidence in favor of tobacco taxation into actual policy change has not been near commensurate. Indeed, tobacco taxation (measure R) is the least implemented measure at the highest level of achievement in the 2021 World Health Organization (WHO) MPOWER package of measures for tobacco control (⁵5. World Health Organization. WHO Report on the Global Tobacco Epidemic 2021: Addressing new and emerging products [Internet]. Geneva: WHO; 2021 [cited 2022 May 9]. Available from: https://www.who.int/publications/i/item/9789240032095
https://www.who.int/publications/i/item/... ). Keeping all of this in mind, it is not surprising that novel and emerging nicotine and tobacco products—around which the evidence base is still developing, and market dynamics are still evolving—pose challenges that further complicate regulatory efforts (⁴4. World Health Organization. WHO technical manual on tobacco tax policy and administration [Internet]. Geneva: WHO; 2021 [cited 2022 May 9]. Available from: https://www.who.int/publications/i/item/9789240019188
https://www.who.int/publications/i/item/... ). Regulatory approaches toward these products have in recent years become a heated point of debate among policymakers and researchers, demanding careful consideration. In practice, the heterogeneity in regulation of these products is evident: while some countries have completely banned sale inside their markets, many other countries are still struggling to determine what is the best approach. Where the sale of these products has not been banned, effective regulation, including taxation, is a key policy to determine in line with decisions taken by the Conference of the Parties (COP) of the international treaty, the WHO Framework Convention on Tobacco Control (WHO FCTC) (⁶6. World Health Organization. Conference of the Parties to the WHO Framework Convention on Tobacco Control, eighth session. Decision FCTC/COP8(22) Novel and emerging tobacco products [Internet]. Geneva: WHO; 2018 [cited 2022 May 9]. Available from: https://fctc.who.int/who-fctc/governance/conference-of-the-parties/eight-session-of-the-conference-of-the-parties/decisions/fctc-cop8(22)-novel-and-emerging-tobacco-products
https://fctc.who.int/who-fctc/governance... , ⁷7. World Health Organization. Conference of the Parties to the WHO Framework Convention on Tobacco Control, sixth session. Decision FCTC/COP6(9) Electronic nicotine delivery systems and electronic non-nicotine delivery systems [Internet]. Geneva: WHO; 2014 [cited 2022 May 16]. Available from: https://apps.who.int/iris/handle/10665/145116
https://apps.who.int/iris/handle/10665/1... ).

Novel products typically cover heated tobacco products (HTPs), electronic nicotine delivery systems (ENDS), electronic non-nicotine delivery systems (ENNDS), and nicotine pouches. This article focuses on HTPs, ENDS, and ENNDS products only, given the availability of information in relation to their regulation.

HTPs are products that contain tobacco, nicotine, and non-tobacco additives, usually presented in the shape of cigarettes (e.g., heat stick or neo stick) or pods or plugs, which are often flavored. The tobacco in HTPs is heated by a device; this produces aerosols that contain nicotine and other toxic chemicals (⁸8. World Health Organization. Information sheet: Measuring priority emissions in heated tobacco products, importance for regulators and significance for public health [Internet]. Geneva: WHO; 2021 [cited 2022 May 9]. Available from: https://apps.who.int/iris/handle/10665/350565
https://apps.who.int/iris/handle/10665/3... ). The COP of the WHO FCTC has recognized HTPs as a tobacco product, confirming that they fall under the provisions of the treaty, calling for an equal regulatory approach for HTPs and any other conventional tobacco product (⁷7. World Health Organization. Conference of the Parties to the WHO Framework Convention on Tobacco Control, sixth session. Decision FCTC/COP6(9) Electronic nicotine delivery systems and electronic non-nicotine delivery systems [Internet]. Geneva: WHO; 2014 [cited 2022 May 16]. Available from: https://apps.who.int/iris/handle/10665/145116
https://apps.who.int/iris/handle/10665/1... ). ENDS products heat a solution (called e-liquid) that contains nicotine and other additives, flavors, and chemicals to create an aerosol that is inhaled by the user. ENDS products are not tobacco products, although some countries have regulated them as tobacco products (e.g., Jamaica and Paraguay) (⁹9. Crosbie E, Severini G, Beem A, Tran B, Sebrie EM. New tobacco and nicotine products in Latin America and the Caribbean: assessing the market and regulatory environment. Tob Control. 2021 Dec 16;tobaccocontrol-2021-056959 [online ahead of print]. https://doi.org/10.1136/tobaccocontrol-2021-056959
https://doi.org/10.1136/tobaccocontrol-2... ). ENNDS products are the same as ENDS except that the e-liquid that is heated does not normally contain nicotine. The most commonly used type of ENDS product is electronic cigarettes (e-cigarettes), but ENDS also include other products such as e-hookahs, e-pipes, or e-cigars (⁵5. World Health Organization. WHO Report on the Global Tobacco Epidemic 2021: Addressing new and emerging products [Internet]. Geneva: WHO; 2021 [cited 2022 May 9]. Available from: https://www.who.int/publications/i/item/9789240032095
https://www.who.int/publications/i/item/... ).

The COP of the WHO FCTC has issued guidance for the regulation of HTPs, ENDS, and ENNDS products such that the protection and promotion of human health is prioritized (⁶6. World Health Organization. Conference of the Parties to the WHO Framework Convention on Tobacco Control, eighth session. Decision FCTC/COP8(22) Novel and emerging tobacco products [Internet]. Geneva: WHO; 2018 [cited 2022 May 9]. Available from: https://fctc.who.int/who-fctc/governance/conference-of-the-parties/eight-session-of-the-conference-of-the-parties/decisions/fctc-cop8(22)-novel-and-emerging-tobacco-products
https://fctc.who.int/who-fctc/governance... , ⁷7. World Health Organization. Conference of the Parties to the WHO Framework Convention on Tobacco Control, sixth session. Decision FCTC/COP6(9) Electronic nicotine delivery systems and electronic non-nicotine delivery systems [Internet]. Geneva: WHO; 2014 [cited 2022 May 16]. Available from: https://apps.who.int/iris/handle/10665/145116
https://apps.who.int/iris/handle/10665/1... ). As there is no clear understanding of the long-term health effects of these products, and they are not inherently safe, policymakers need to ensure that the right levels of regulations are in place so that they do not encourage initiation by youths and non-smokers (⁴4. World Health Organization. WHO technical manual on tobacco tax policy and administration [Internet]. Geneva: WHO; 2021 [cited 2022 May 9]. Available from: https://www.who.int/publications/i/item/9789240019188
https://www.who.int/publications/i/item/... , ⁵5. World Health Organization. WHO Report on the Global Tobacco Epidemic 2021: Addressing new and emerging products [Internet]. Geneva: WHO; 2021 [cited 2022 May 9]. Available from: https://www.who.int/publications/i/item/9789240032095
https://www.who.int/publications/i/item/... , ⁸8. World Health Organization. Information sheet: Measuring priority emissions in heated tobacco products, importance for regulators and significance for public health [Internet]. Geneva: WHO; 2021 [cited 2022 May 9]. Available from: https://apps.who.int/iris/handle/10665/350565
https://apps.who.int/iris/handle/10665/3... ). This includes consideration to taxation of these products, taxation being a core component of a comprehensive regulatory approach in the context of tobacco control. Analyzing data from two leading market research companies, data from the WHO Report on the Global Tobacco Epidemic 2021 (⁵5. World Health Organization. WHO Report on the Global Tobacco Epidemic 2021: Addressing new and emerging products [Internet]. Geneva: WHO; 2021 [cited 2022 May 9]. Available from: https://www.who.int/publications/i/item/9789240032095
https://www.who.int/publications/i/item/... ), and country laws and decrees, this article provides a brief overview of the current market and regulatory fiscal landscape, with a focus on excise taxation, for HTPs, ENDS, and ENNDS products globally and, more specifically, in Latin American countries.¹1This article considers the 19 Latin American Member States of the Pan American Health Organization, WHO Regional Office for the Americas: Argentina, Bolivia, Brazil, Chile, Costa Rica, Colombia, Cuba, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay, and Venezuela.

GLOBAL OVERVIEW

Current market trends

Globally, HTPs have seen exceptional growth in a short time frame, with both market value and quantity growing at an exponential rate. According to Euromonitor, the market value in constant US$ increased from an estimated value of US$ 3.97 billion in 2013 to US$ 20.78 billion in 2020, with no signs of slowdown in the near future (¹⁰10. Euromonitor International Limited [Internet]. London: Euromonitor; 2020 [cited 2022 May 9]. Tobacco: All, Latin America. Available from: https://www.portal.euromonitor.com/ [restricted access].
https://www.portal.euromonitor.com/... ). In terms of quantity, the trend is similar, with the number of sticks sold increasing from an estimated 2.4 million in 2013 to 94.5 billion in 2020. The tobacco heating devices sales have also seen an increase from an estimated 41 557 units in 2013 to 20.7 million units in 2020 (¹⁰10. Euromonitor International Limited [Internet]. London: Euromonitor; 2020 [cited 2022 May 9]. Tobacco: All, Latin America. Available from: https://www.portal.euromonitor.com/ [restricted access].
https://www.portal.euromonitor.com/... ).²2Global aggregate values and numbers for HTP sales are likely to be underestimates, as Euromonitor covers a third of all countries for HTPs, although the largest markets are included.

The supply of HTPs appears to be very highly concentrated, with only a handful of companies catering to the demand of the top five markets (Japan, Republic of Korea, Russian Federation, Italy, and Germany) (¹¹11. TobaccoIntelligence [Internet]. London: Tamarind Media; 2020 [cited 2022 May 11]. The world’s 5 biggest heated tobacco markets at a glance, March 2020. Available from: https://tobaccointelligence.com/ [restricted access].
https://tobaccointelligence.com/... ). In 2020, Philip Morris International’s brand IQOS held by far the largest market share in all five countries. Other key brands present in those markets are Glo (British American Tobacco—BAT), Ploom TECH and Ploom S (JTI), and Lil (Korea Tobacco & Ginseng Corporation—KT&G) (¹¹11. TobaccoIntelligence [Internet]. London: Tamarind Media; 2020 [cited 2022 May 11]. The world’s 5 biggest heated tobacco markets at a glance, March 2020. Available from: https://tobaccointelligence.com/ [restricted access].
https://tobaccointelligence.com/... ).

In terms of sales trends, according to Euromonitor, ENDS and ENNDS products have experienced a strong growth of the market over time up until 2019 (from US$ 150 million in 2006 to US$ 20.5 billion in 2019), which was followed by a decrease in the growth rate since (sales value of US$ 21.2 billion in 2020).³3Global aggregate sales values for ENDS and ENNDS products are likely to be underestimates, as Euromonitor covers about half of all countries globally for those products, although the largest markets are included. This may be due to the reduction in the market value of open systems, while the market value of closed systems continues to experience an increase in the growth rate. Open systems are devices where users can make their own mixes of the e-liquids they buy, which could be with no nicotine, different nicotine concentrations, and/or flavors. Closed systems come with a prefilled container (called a cartridge, pod, or tank) with no possibility for the users to make their own mixes. In terms of market share globally, closed systems held 64.1% of the market value in 2020 while open systems held 35.9% of the market value (¹¹11. TobaccoIntelligence [Internet]. London: Tamarind Media; 2020 [cited 2022 May 11]. The world’s 5 biggest heated tobacco markets at a glance, March 2020. Available from: https://tobaccointelligence.com/ [restricted access].
https://tobaccointelligence.com/... ).

The market for ENDS and ENNDS products seems much more fragmented compared to HTPs, with more than 30 000 ENDS (devices and e-liquids) brands sold in the European Union alone (⁵5. World Health Organization. WHO Report on the Global Tobacco Epidemic 2021: Addressing new and emerging products [Internet]. Geneva: WHO; 2021 [cited 2022 May 9]. Available from: https://www.who.int/publications/i/item/9789240032095
https://www.who.int/publications/i/item/... ). However, the market has been consolidating very rapidly, with Euromonitor estimating that in 2020 just three companies held 45.5% of the market share of ENDS and ENNDS products globally. The top company is Juul Labs Inc., followed by BAT and the Chinese company RELX Technology Co. Ltd. (¹⁰10. Euromonitor International Limited [Internet]. London: Euromonitor; 2020 [cited 2022 May 9]. Tobacco: All, Latin America. Available from: https://www.portal.euromonitor.com/ [restricted access].
https://www.portal.euromonitor.com/... ). With Altria having a 35% stake in Juul Labs (¹²12. ECigIntelligence [Internet]. London: Tamarind Media; 2021 [cited 2022 May 11]. Regulatory and market intelligence for the e-cigarette sector, 20 December 2018. Available from: https://ecigintelligence.com/ [restricted access].
https://ecigintelligence.com/... ) and BAT standing second globally in terms of sales in this sector (14.1% of global sales values in 2020) (¹⁰10. Euromonitor International Limited [Internet]. London: Euromonitor; 2020 [cited 2022 May 9]. Tobacco: All, Latin America. Available from: https://www.portal.euromonitor.com/ [restricted access].
https://www.portal.euromonitor.com/... ), it is clear that the tobacco industry is rapidly becoming an important player in the ENDS/ENNDS market, and not just in HTPs.

The market share of both HTPs and ENDS/ENNDS products remains very small compared to the share of conventional tobacco products, with each representing about 2.4%–2.5% of the total market value. However, as indicated earlier, those numbers are likely to be underestimates given Euromonitor’s limited coverage of countries for novel products (although the largest markets are included). In any case, those shares have been growing relatively fast over time, eating up more of the total value pie, as can be seen in Figure 1.

Tax structures applied globally and price levels

As of 2020, there were 11 countries banning HTPs sales (Brazil, Democratic People’s Republic of Korea, Ethiopia, India, Iran, Mexico, Norway, Panama, Singapore, Syrian Arab Republic, and Timor-Leste) (⁵5. World Health Organization. WHO Report on the Global Tobacco Epidemic 2021: Addressing new and emerging products [Internet]. Geneva: WHO; 2021 [cited 2022 May 9]. Available from: https://www.who.int/publications/i/item/9789240032095
https://www.who.int/publications/i/item/... ). Where they are not banned, at least 61 countries and one territory imposed an excise tax on those products. Table 1 summarizes the type of excise tax applied in those countries. Most countries apply a specific excise on HTPs based on the tobacco weight contained; those rates are generally lower than the cigarette excise tax rate. Only a handful apply the tax on the sticks and a fewer number impose the same tax as the one applied on cigarettes.

As of 2020, a total of 27 countries and 1 territory banned both ENDS and ENNDS sales (Bahrain, Brazil, Brunei Darussalam, Cambodia, Democratic People’s Republic of Korea, Egypt, Gambia, India, Iran, Iraq, Jordan, Kuwait, Lebanon, Mauritius, Mexico, Oman, Panama, Qatar, Singapore, Suriname, Syrian Arab Republic, Thailand, Timor-Leste, Turkmenistan, Uganda, Uruguay, Venezuela, and Palestinian territories) and 4 countries banned ENDS sales only (Argentina, Ethiopia, Malaysia, and Sri Lanka) (⁵5. World Health Organization. WHO Report on the Global Tobacco Epidemic 2021: Addressing new and emerging products [Internet]. Geneva: WHO; 2021 [cited 2022 May 9]. Available from: https://www.who.int/publications/i/item/9789240032095
https://www.who.int/publications/i/item/... ). Where they are not banned, at least 40 countries imposed an excise tax on those products. Approaches vary, with most countries implementing a specific excise on the volume of the e-liquids (Table 2). More countries tax all e-liquids (e-liquids for ENDS and ENNDS products) at the same rate. But some countries like Italy, Morocco, and Slovenia impose a lower rate on e-liquids for ENNDS products. The Philippines, on the other hand, imposes a differential rate for nicotine salts and freebase nicotine. Compared to e-liquids with freebase nicotine, those with nicotine salts deliver higher levels of nicotine to the user while masking its harshness (⁵5. World Health Organization. WHO Report on the Global Tobacco Epidemic 2021: Addressing new and emerging products [Internet]. Geneva: WHO; 2021 [cited 2022 May 9]. Available from: https://www.who.int/publications/i/item/9789240032095
https://www.who.int/publications/i/item/... ). Indonesia imposes a differential rate on the e-liquids of closed systems compared to those of open systems. Finally, Denmark and Sweden apply a higher rate on e-liquids containing higher concentrations of nicotine.

Some countries such as the Russian Federation also apply an excise on ENDS and ENNDS devices (²⁰20. ECigIntelligence [Internet]. London: Tamarind Media; 2021 [cited 2022 May 11]. Global regulatory tracker: current regulation of e-cigs, October 2021. Available from: https://ecigintelligence.com/ [restricted access].
https://ecigintelligence.com/... ) but there are no data compiled in a systematic manner to identify all the countries that do apply such a tax.

There is little information on how HTPs, ENDS, and ENNDS products compare with cigarettes in terms of prices and tax burden. Using information available from the WHO Report on the Global Tobacco Epidemic 2021 (⁵5. World Health Organization. WHO Report on the Global Tobacco Epidemic 2021: Addressing new and emerging products [Internet]. Geneva: WHO; 2021 [cited 2022 May 9]. Available from: https://www.who.int/publications/i/item/9789240032095
https://www.who.int/publications/i/item/... ) for cigarettes, HTPs, and e-liquids of open and closed ENDS systems, a compilation was made possible for 31 countries, looking at average price and tax burden by type of product, as depicted in Figure 2. While the tax burden is lower in all novel products when compared with cigarettes, average prices show different trends. Using a specific metric to compare the unit price of those products (as explained in note 2 of Figure 2), Figure 2 shows that the price of HTPs and e-liquids of closed systems is very close to the price of cigarettes, while the price of e-liquids of open systems is much lower.

REGULATORY AND MARKET SITUATION IN LATIN AMERICA

Regional market trends

Similar to global trends, the ENDS and ENNDS industry in Latin America has grown substantially over the past five years. Euromonitor estimated a retail value of US$ 94.2 million in 2020, up from US$ 21 million in 2015, in constant US$, in the major Latin American markets (¹⁰10. Euromonitor International Limited [Internet]. London: Euromonitor; 2020 [cited 2022 May 9]. Tobacco: All, Latin America. Available from: https://www.portal.euromonitor.com/ [restricted access].
https://www.portal.euromonitor.com/... ). While this is still a relatively small share (estimated at 0.5%) of the total market value for tobacco products in Latin America, the rapid growth of these products has resulted in a gain in their share of the total value pie over time versus traditional tobacco products (¹⁰10. Euromonitor International Limited [Internet]. London: Euromonitor; 2020 [cited 2022 May 9]. Tobacco: All, Latin America. Available from: https://www.portal.euromonitor.com/ [restricted access].
https://www.portal.euromonitor.com/... ).

The variability of brands selling ENDS and ENNDS products, particularly e-liquids, is wide and widening, with a growth of local e-liquid brands in countries like Colombia and Mexico (²²22. ECigIntelligence [Internet]. London: Tamarind Media; 2021 [cited 2022 May 11]. Market report: Latin America – current trends and future market perspectives: Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Paraguay, Peru. Available from: https://ecigintelligence.com/ [restricted access].
https://ecigintelligence.com/... ). However, BAT holds a significant share of the total sales values of ENDS and ENNDS products in the major Latin American markets, through their brand Vype (¹⁰10. Euromonitor International Limited [Internet]. London: Euromonitor; 2020 [cited 2022 May 9]. Tobacco: All, Latin America. Available from: https://www.portal.euromonitor.com/ [restricted access].
https://www.portal.euromonitor.com/... ). Indeed, increasingly, the top three companies in terms of percentage market share—BAT, Shenzhen Joy Technology Co. Ltd, and Ritchy Group Ltd.—are deepening their market concentration (¹⁰10. Euromonitor International Limited [Internet]. London: Euromonitor; 2020 [cited 2022 May 9]. Tobacco: All, Latin America. Available from: https://www.portal.euromonitor.com/ [restricted access].
https://www.portal.euromonitor.com/... ).

The market for HTPs in Latin America is at a much younger stage, and the market size, while growing, is relatively small, with an estimated retail value of US$ 17 million in 2020 across the major markets of Colombia, the Dominican Republic, and Guatemala; this represents only an estimated 0.08% of the total market for tobacco products in Latin America (¹⁰10. Euromonitor International Limited [Internet]. London: Euromonitor; 2020 [cited 2022 May 9]. Tobacco: All, Latin America. Available from: https://www.portal.euromonitor.com/ [restricted access].
https://www.portal.euromonitor.com/... ). Nevertheless, the market size has been increasing since 2017 and is forecast to grow rapidly over the next five years (¹⁰10. Euromonitor International Limited [Internet]. London: Euromonitor; 2020 [cited 2022 May 9]. Tobacco: All, Latin America. Available from: https://www.portal.euromonitor.com/ [restricted access].
https://www.portal.euromonitor.com/... ). In terms of supply, the market appears to be concentrated, with Philip Morris’s IQOS brand found in several Latin American countries, such as Colombia, Costa Rica, and Mexico (²²22. ECigIntelligence [Internet]. London: Tamarind Media; 2021 [cited 2022 May 11]. Market report: Latin America – current trends and future market perspectives: Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Paraguay, Peru. Available from: https://ecigintelligence.com/ [restricted access].
https://ecigintelligence.com/... ).

Regulatory frameworks and tax structures applied regionally

As in other parts of the world, governments in Latin America have taken heterogeneous approaches toward regulation of HTPs, ENDS, and ENNDS products. In the case of HTPs, in Latin America, 3 countries (Brazil, Mexico, and Panama) have opted for a complete ban of their sale (⁵5. World Health Organization. WHO Report on the Global Tobacco Epidemic 2021: Addressing new and emerging products [Internet]. Geneva: WHO; 2021 [cited 2022 May 9]. Available from: https://www.who.int/publications/i/item/9789240032095
https://www.who.int/publications/i/item/... , ⁹9. Crosbie E, Severini G, Beem A, Tran B, Sebrie EM. New tobacco and nicotine products in Latin America and the Caribbean: assessing the market and regulatory environment. Tob Control. 2021 Dec 16;tobaccocontrol-2021-056959 [online ahead of print]. https://doi.org/10.1136/tobaccocontrol-2021-056959
https://doi.org/10.1136/tobaccocontrol-2... ), 4 countries regulate them as tobacco products with an explicit mention in their respective legal measures (Bolivia, Costa Rica, Paraguay, and Uruguay), while another 11 countries (Argentina, Chile, Colombia, Cuba, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Peru, and Venezuela) include in their tobacco control legislation a definition of tobacco products aligned with the WHO FCTC or provisions which are broad enough to imply HTPs’ regulation, although not explicitly mentioned (⁹9. Crosbie E, Severini G, Beem A, Tran B, Sebrie EM. New tobacco and nicotine products in Latin America and the Caribbean: assessing the market and regulatory environment. Tob Control. 2021 Dec 16;tobaccocontrol-2021-056959 [online ahead of print]. https://doi.org/10.1136/tobaccocontrol-2021-056959
https://doi.org/10.1136/tobaccocontrol-2... , ¹⁷17. Gobierno de la República de Ecuador. Ley de Régimen Tributario Interno [Internet]. Ecuador: Gobierno de la República de Ecuador; 2020 [cited 2022 May 11]., ¹⁸18. Gobierno de Costa Rica. Diario Oficial La Gaceta Costa Rica No 12. Costa Rica: Imprenta Nacional Costa Rica; 2022 January 20.).

In the case of ENDS and ENNDS products, six countries in Latin America have completely banned their sale (Argentina, Brazil, Mexico, Panama, Uruguay, and Venezuela), seven have applied some form of regulation, but, concerningly, six (Colombia, Cuba, Dominican Republic,⁴4While the Dominican Republic does not apply comprehensive regulations on HTPs and ENDS/ENNDS, it does explicitly ban their use in health facilities only (23). Guatemala, Nicaragua, and Peru) have no regulation in place, despite four of them being Parties to the WHO FCTC (⁵5. World Health Organization. WHO Report on the Global Tobacco Epidemic 2021: Addressing new and emerging products [Internet]. Geneva: WHO; 2021 [cited 2022 May 9]. Available from: https://www.who.int/publications/i/item/9789240032095
https://www.who.int/publications/i/item/... , ⁹9. Crosbie E, Severini G, Beem A, Tran B, Sebrie EM. New tobacco and nicotine products in Latin America and the Caribbean: assessing the market and regulatory environment. Tob Control. 2021 Dec 16;tobaccocontrol-2021-056959 [online ahead of print]. https://doi.org/10.1136/tobaccocontrol-2021-056959
https://doi.org/10.1136/tobaccocontrol-2... , ²²22. ECigIntelligence [Internet]. London: Tamarind Media; 2021 [cited 2022 May 11]. Market report: Latin America – current trends and future market perspectives: Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Paraguay, Peru. Available from: https://ecigintelligence.com/ [restricted access].
https://ecigintelligence.com/... ). Out of the seven countries that regulate them, five countries (Bolivia, Costa Rica, Ecuador, Honduras, and Paraguay), treat them as tobacco or tobacco-related products, one (Chile) regulates them as a therapeutic product, and one (El Salvador) classifies them as a consumer product (⁵5. World Health Organization. WHO Report on the Global Tobacco Epidemic 2021: Addressing new and emerging products [Internet]. Geneva: WHO; 2021 [cited 2022 May 9]. Available from: https://www.who.int/publications/i/item/9789240032095
https://www.who.int/publications/i/item/... , ⁹9. Crosbie E, Severini G, Beem A, Tran B, Sebrie EM. New tobacco and nicotine products in Latin America and the Caribbean: assessing the market and regulatory environment. Tob Control. 2021 Dec 16;tobaccocontrol-2021-056959 [online ahead of print]. https://doi.org/10.1136/tobaccocontrol-2021-056959
https://doi.org/10.1136/tobaccocontrol-2... , ¹⁶16. Congreso de la Nación Paraguaya. Ley 6380. Paraguay: Congreso de la Nación Paraguaya; 2019.–¹⁸18. Gobierno de Costa Rica. Diario Oficial La Gaceta Costa Rica No 12. Costa Rica: Imprenta Nacional Costa Rica; 2022 January 20., ²²22. ECigIntelligence [Internet]. London: Tamarind Media; 2021 [cited 2022 May 11]. Market report: Latin America – current trends and future market perspectives: Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Paraguay, Peru. Available from: https://ecigintelligence.com/ [restricted access].
https://ecigintelligence.com/... –²⁸28. Ministerio de la Salud Pública y Bienestar Social. Resolución S.G. No 630. Paraguay: Poder Legislativo; 2019 December 12.). Of note, some countries apply these regulatory frameworks only to ENDS (e.g., the sale ban in Argentina applies only to ENDS), and in other countries ENNDS are treated the same as ENDS (e.g., Brazil and Honduras) (⁹9. Crosbie E, Severini G, Beem A, Tran B, Sebrie EM. New tobacco and nicotine products in Latin America and the Caribbean: assessing the market and regulatory environment. Tob Control. 2021 Dec 16;tobaccocontrol-2021-056959 [online ahead of print]. https://doi.org/10.1136/tobaccocontrol-2021-056959
https://doi.org/10.1136/tobaccocontrol-2... ). In practice, ENDS products can be almost indistinguishable from ENNDS, complicating regulatory enforcement efforts in the case that only one product is regulated.

In regard to taxation of these products, five countries (Colombia, Costa Rica, Ecuador, Paraguay, and Peru) apply taxes on HTPs, Ecuador explicitly applies taxes on ENDS, and Costa Rica explicitly applies taxes on both ENDS and ENNDS. Specific excise taxes on HTPs are used in Peru (base unit is individual stick) and ad valorem excise taxes on the final retail price are implemented by Costa Rica, Ecuador, and Paraguay (¹⁶16. Congreso de la Nación Paraguaya. Ley 6380. Paraguay: Congreso de la Nación Paraguaya; 2019.–¹⁸18. Gobierno de Costa Rica. Diario Oficial La Gaceta Costa Rica No 12. Costa Rica: Imprenta Nacional Costa Rica; 2022 January 20.). Colombia has a mixed excise tax on HTPs, where the specific component is applied on the number of sticks as base unit (⁵5. World Health Organization. WHO Report on the Global Tobacco Epidemic 2021: Addressing new and emerging products [Internet]. Geneva: WHO; 2021 [cited 2022 May 9]. Available from: https://www.who.int/publications/i/item/9789240032095
https://www.who.int/publications/i/item/... ). In six countries (Argentina, Bolivia, Dominican Republic, El Salvador, Honduras, and Venezuela), even though their legislation has not yet explicitly included taxation on HTPs, the broad definition of taxation applying to other tobacco products suggests that they could implement excise taxes as they do for other tobacco products (⁵5. World Health Organization. WHO Report on the Global Tobacco Epidemic 2021: Addressing new and emerging products [Internet]. Geneva: WHO; 2021 [cited 2022 May 9]. Available from: https://www.who.int/publications/i/item/9789240032095
https://www.who.int/publications/i/item/... , ⁹9. Crosbie E, Severini G, Beem A, Tran B, Sebrie EM. New tobacco and nicotine products in Latin America and the Caribbean: assessing the market and regulatory environment. Tob Control. 2021 Dec 16;tobaccocontrol-2021-056959 [online ahead of print]. https://doi.org/10.1136/tobaccocontrol-2021-056959
https://doi.org/10.1136/tobaccocontrol-2... , ²⁴24. Asamblea Legislativa Plurinacional Bolivia. LEY N° 1280: LEY DE PREVENCIÓN Y CONTROL AL CONSUMO DE LOS PRODUCTOS DE TABACO. Bolivia: Asamblea Legislativa Plurinacional; 2020 February 13., ²⁶26. Ministerio de Salud de El Salvador. Reglamento de la Ley para el Control de Tabaco. El Salvador: Diario Oficial; 2015 June 5., ²⁷27. Congreso Nacional de Honduras. Ley Especial para el Control de Tabaco. Honduras: La Gaceta; 2010., ²⁹29. TobaccoIntelligence [Internet]. London: Tamarind Media; 2021 [cited 2022 May 11]. Regulatory report: Argentina – heated tobacco and oral tobacco. Available from: https://tobaccointelligence.com/ [restricted access].
https://tobaccointelligence.com/... –³²32. Chavez, H. Decreto N° 5.619 03 de octubre de 2007: Gaceta Oficial Nº 5.852 Extraordinario del 5 de octubre de 2007. Venezuela: Presidencia de la República Bolivariana de Venezuela; 2007.).

Ad valorem excise taxes are applied on ENDS products in Ecuador (¹⁷17. Gobierno de la República de Ecuador. Ley de Régimen Tributario Interno [Internet]. Ecuador: Gobierno de la República de Ecuador; 2020 [cited 2022 May 11].). Costa Rica applies ad valorem excise taxes on ENDS and ENNDS products (¹⁸18. Gobierno de Costa Rica. Diario Oficial La Gaceta Costa Rica No 12. Costa Rica: Imprenta Nacional Costa Rica; 2022 January 20.). The remaining three countries that regulate ENDS/ENNDS products as tobacco products (Bolivia, Honduras, and Paraguay) have broad definitions of taxation applying to other tobacco products that suggest they could implement excise taxes for ENDS/ENNDS as they do for other tobacco products (⁹9. Crosbie E, Severini G, Beem A, Tran B, Sebrie EM. New tobacco and nicotine products in Latin America and the Caribbean: assessing the market and regulatory environment. Tob Control. 2021 Dec 16;tobaccocontrol-2021-056959 [online ahead of print]. https://doi.org/10.1136/tobaccocontrol-2021-056959
https://doi.org/10.1136/tobaccocontrol-2... , ¹⁶16. Congreso de la Nación Paraguaya. Ley 6380. Paraguay: Congreso de la Nación Paraguaya; 2019., ²⁴24. Asamblea Legislativa Plurinacional Bolivia. LEY N° 1280: LEY DE PREVENCIÓN Y CONTROL AL CONSUMO DE LOS PRODUCTOS DE TABACO. Bolivia: Asamblea Legislativa Plurinacional; 2020 February 13., ²⁷27. Congreso Nacional de Honduras. Ley Especial para el Control de Tabaco. Honduras: La Gaceta; 2010., ²⁸28. Ministerio de la Salud Pública y Bienestar Social. Resolución S.G. No 630. Paraguay: Poder Legislativo; 2019 December 12.). Other countries, such as Colombia, have proposed legislation to implement excise taxes on ENDS and ENNDS products (³³33. Mesa Directiva de la Comisión Tercera de la Cámara de Representantes. PONENCIA PARA PRIMER DEBATE AL PROYECTO DE LEY NÚMERO 339 de 2020 de Cámara acumulado con el PROYECTO DE LEY NÚMERO 365 de 2020. Bogotá: Cámara de Representantes; 2020.).

DISCUSSION

Unlike cigarette taxation, novel and emerging nicotine and tobacco products do not have a long history of taxation, and, therefore, the knowledge and evidence-base for best practices is not yet well established.

However, the experience in tobacco taxation can shed light on some effective approaches to the taxation of those products. For example, having a clearly defined and identifiable base for the excise tax will be important for both policymakers and tax administrators to implement this tax effectively. If specific excise tax is considered, the unit base needs to be clearly defined to facilitate enforcement. For example, in the case of e-liquids for ENDS and ENNDS products, a base of mL could be advisable. For HTPs, defining the unit base as the stick rather than the tobacco weight contained in each stick is much easier to implement from a tax administration perspective, as one can easily control the quantity of stick declared. If ad valorem tax is considered, setting the retail price as the base will be as effective for cigarettes as for HTPs or ENDS and ENNDS products because such base can be easily verified in the market and is less prone to undervaluation by manufacturers (⁴4. World Health Organization. WHO technical manual on tobacco tax policy and administration [Internet]. Geneva: WHO; 2021 [cited 2022 May 9]. Available from: https://www.who.int/publications/i/item/9789240019188
https://www.who.int/publications/i/item/... ).

For ENDS products, a question arises on whether the excise tax should increase with higher nicotine concentration (this is, for example, the case for Denmark and Sweden). While nicotine itself is a toxicant (³⁴34. Mayer B. How much nicotine kills a human? Tracing back the generally accepted lethal dose to dubious self-experiments in the nineteenth century. Arch Toxicol. 2014;88(1):5–7. doi:10.1007/s00204-013-1127-0
https://doi.org/10.1007/s00204-013-1127-... ), its impact depends essentially on how it is absorbed into the body of consumers. This can vary, in the case of tobacco, depending on the type of product consumed (e.g., smoked vs. chewed or nasal product) (³⁵35. Davis RA, Curvali M. Determination of nicotine and its metabolites in biological fluids: in vivo studies. In: Gorrod JW, Jacob P, (editors). Analytical Determination of Nicotine and Related Compounds and their Metabolites. Elsevier Science; 1999:583–643.). In the case of ENDS products, this can depend, for example, on the battery power used for vaping, which can increase the nicotine delivery in e-liquids with low nicotine concentration by increasing voltage (³⁶36. Wagener TL, Floyd EL, Stepanov I, Driskill LM, Frank SG, Meier E, et al. Have combustible cigarettes met their match? The nicotine delivery profiles and harmful constituent exposures of second-generation and third-generation electronic cigarette user. Tob Control. 2017;26:e23–e28.). This is one good reason to tax ENDS e-liquids similarly regardless of nicotine concentration. Additionally, nicotine from all sources should be taxed (e.g., nicotine extracted from the leaf or the stem of tobacco or synthetic nicotine) (⁴4. World Health Organization. WHO technical manual on tobacco tax policy and administration [Internet]. Geneva: WHO; 2021 [cited 2022 May 9]. Available from: https://www.who.int/publications/i/item/9789240019188
https://www.who.int/publications/i/item/... ). Pushing the argument further, WHO also recommends taxing both nicotine and non-nicotine containing e-liquids similarly. This will reduce the burden on authorities to ensure e-liquids labeled as nicotine-free are indeed without nicotine (which is not always the case) (⁴4. World Health Organization. WHO technical manual on tobacco tax policy and administration [Internet]. Geneva: WHO; 2021 [cited 2022 May 9]. Available from: https://www.who.int/publications/i/item/9789240019188
https://www.who.int/publications/i/item/... ).

With regard to the tax levels to apply on novel and emerging nicotine and tobacco products, WHO recommends taxing HTPs using the same structure and rate as cigarettes, given that they are also a tobacco product designed to look and, in a way, operate like cigarettes (⁴4. World Health Organization. WHO technical manual on tobacco tax policy and administration [Internet]. Geneva: WHO; 2021 [cited 2022 May 9]. Available from: https://www.who.int/publications/i/item/9789240019188
https://www.who.int/publications/i/item/... ). For ENDS and ENNDS products, the discussion is less straightforward given the complexity of the product and the difficulty in comparing it with tobacco products such as cigarettes. WHO recommends taxing it highly enough that it discourages use by youth and non-tobacco users (⁵5. World Health Organization. WHO Report on the Global Tobacco Epidemic 2021: Addressing new and emerging products [Internet]. Geneva: WHO; 2021 [cited 2022 May 9]. Available from: https://www.who.int/publications/i/item/9789240032095
https://www.who.int/publications/i/item/... , ⁷7. World Health Organization. Conference of the Parties to the WHO Framework Convention on Tobacco Control, sixth session. Decision FCTC/COP6(9) Electronic nicotine delivery systems and electronic non-nicotine delivery systems [Internet]. Geneva: WHO; 2014 [cited 2022 May 16]. Available from: https://apps.who.int/iris/handle/10665/145116
https://apps.who.int/iris/handle/10665/1... ). Figure 2 shows, for example, that open systems e-liquids remain very cheap compared with other products, and this can be a good justification for taxing ENDS and ENNDS products further.

Finally, taxing devices can also be an approach for consideration by tax authorities. They can be taxed per unit (either through a specific excise or an ad valorem) but authorities will need to clearly identify and define what those units are (⁴4. World Health Organization. WHO technical manual on tobacco tax policy and administration [Internet]. Geneva: WHO; 2021 [cited 2022 May 9]. Available from: https://www.who.int/publications/i/item/9789240019188
https://www.who.int/publications/i/item/... ).

Conclusion

This article provides a snapshot of the market structure and regulatory approach around novel and emerging tobacco and nicotine products, both globally and in Latin America, with a focus on excise taxation.

The global demand in HTPs, ENDS, and ENNDS products, though small relative to conventional tobacco products, has increased rapidly in recent years, showing an appetite for these novel products. A similar trend can be observed in Latin American countries. While a few countries have decided to ban the sale of these products, others have kept them unregulated; where they are regulated, a sizable number of countries apply an excise tax on them. Approaches vary in structures and rates, but evidence from 31 countries shows that the tax burden remains quite low compared to the tax applied on cigarettes.

While evidence is not yet available on the ideal tax structures and rates to apply to HTPs, ENDS, and ENNDS products, experience and knowledge accumulated in tobacco taxation can provide some guidance on possible best practices. Ultimately, policymakers need to ensure that the right levels of regulations are in place such that these products are not taken up by youths and non-smokers, since they are not inherently safe and their long-term health effects remain unknown. Implementation of excise taxes effective in reducing the affordability of these products will be a key regulatory approach.

As the market of HTPs, ENDS, and ENNDS products continues to evolve and grow, and as governments continue to explore new ways to regulate them, further analysis will be needed to take stock of the successes and failures experienced. Monitoring the evolution of these products’ market sizes and structures, along with the way they are being regulated, will be useful because experience has shown that policies and markets are interdependent; they influence and shape each other over time. The current regulatory approaches summarized in this article provide a starting point as to the options available to countries, with some pointers to good practices to consider, particularly in relation to excise taxation.

Disclaimer.

Authors hold sole responsibility for the views expressed in the manuscript, which may not necessarily reflect the opinion or policy of the RPSP/PAJPH and/or the Pan American Health Organization (PAHO)/World Health Organization (WHO).

Acknowledgments.

The authors would like to thank and acknowledge Itziar Belausteguigoitia for her thoughtful contributions to this work.

REFERENCES

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