E-cigarette ban triggers tax revenue decline, smoker rights group warns

A smoker rights advocacy group warned that a further ban on alternative tobacco products could result in lost tax revenue, suggesting reintegrating them into sales regulations and imposing reasonable taxes.

Smokers Insight, the advocacy group, believes this approach could redirect a substantial portion of illegal tobacco sales back to the legal market, helping to combat the illegal market while potentially increasing tobacco tax revenue to over HK$10 billion.

It is learned that a ban on e-cigarettes and other alternative smoking products will be gradually implemented in two phases, starting with a prohibition on public use of vape cartridges in the second quarter of 2026.

The group’s spokesman, Harris Yeung Ho-chuen, said the government has significantly underestimated the number of alternative tobacco users, and that banning their possession would lead to a loss of tax revenue.

From March 26 to 30, the group organized volunteers to collect used traditional cigarette butts, heated tobacco, and e-cigarette cartridges in Tsim Sha Tsui, Mong Kok, Kwun Tong, Admiralty, and Lan Kwai Fong, gathering over 500 used items. The traditional butts filled one 1.8-liter container, while the alternative tobacco cartridges filled two.

Since April 2022, Hong Kong has banned the import of alternative tobacco products, including e-cigarettes and heated tobacco, while personal possession remains legal. In 2023, 2.6 percent of smokers used alternative tobacco. 

The organization noted that two-thirds of the collected items were alternative products, suggesting the government has underestimated its user base despite the three-year ban.

Economist Kevin Tsui Ka-kin indicated that despite two tobacco tax increases in the past two years, last year’s tobacco tax revenue was only HK$3.8 billion, significantly below the estimated HK$9 billion, with illicit tobacco issues worsening. 

He argued that further bans on flavored cigarettes and public use of e-cigarettes would push more smokers into the illicit market, reducing tax revenue and harming public health.

“Illicit tobacco is much cheaper than taxed cigarettes, and if smokers switch to cheaper options, their consumption will increase, contradicting the original goal of smoking control,” Tsui said.

He estimated that if about 40 percent of smokers who use flavored cigarettes switch to illicit products, tobacco tax revenue could fall to HK$2.2 billion.

Tsui stated that with an estimated half of smokers in Hong Kong using alternative tobacco, the potential tax revenue from these products could reach about HK$7.6 billion, similar to what was previously collected from traditional cigarettes. 

He suggested that authorities lower tobacco taxes to pre-2022 levels and regulate the sale of alternative tobacco, imposing reasonable taxes to bring illicit and alternative tobacco sales back into the legal market, which could potentially restore tax revenue to the HK$10 billion level.