Tax & Trade Blog

In Part 1 of this Series, we explored CRA’s recent increased taxation and audit activity in Canada’s Vaping Industry.  In Part 2 of this Series we explored Health Canada’s imminent ban on flavoured vaping products.  These three initiatives have created an unhappy trifecta that may signal major business difficulties for many vaping manufacturers, importers and retailers in 2025, and in our final Report, we raise concerns about the Government’s policy choices.

The Hazy Logic of Canada’s Regulatory Policy

One the one hand, Health Canada’s expected ban on flavoured vapes is focused on protecting vulnerable citizens (youth) and is laudable.  Similarly, CRA’s continued levels of high taxation in this industry help support Canada’s massive spending levels, helping reduce the significant debt we are already leaving to future generations.  At this level these policies seem to make sense.  On another level they also look rather suspect.

Canada’s federal and provincial taxes of “vaping products” is really a vaping duty imposed under the Excise Act, 2001(the “Vaping Duty” and “EA 2001”), and the CRA is in charge of administering that excise duty – Including related audit activities.

CRA appears to be ramping up its audit activity in this area, now issuing proposed and final assessments under the taxing provisions in EA 2001 sections 158.57, 158.58 and 158.61.

As a firm specializing in International Trade and related regulatory issues, we have noticed a marked increase in recent inquiries regarding the new regulatory requirements for Nicotine Pouches.  This uptick coincides with Health Canada’s recent announcement effectively restricting the sale of Nicotine Replacement Therapies (“NRTs”), including Nicotine Pouches, to pharmacies – and the need to understand how comprehensive these apply to current business, and what options there are for moving forward.