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Business Week: why tobacco Companies like electronic cigarettes?

September 30, 2013

Governments all over the world have declared a real hunt for electronic cigarettes' manufacturers and buyers. In July of current year Health Committee in Euro parliament has approved ban for selling cigarettes outside pharmacies, now USA authorities also consider prohibition their online sale and advertising. Such ban already gas force in Brasilia, Canada, Denmark, Turkey, Norway, Australia, New Zealand, Uruguay, Italy and Russia. Why authorities haven't liked cigarettes that generate nicotine-containing steam?

Business Week explains: business of electronic cigarettes play the same rules as tobacco but word "taxes" in this case is the key word. First, for clarification - market of electronic cigarettes undergoes boom and this year it may reach 1 billion USD, but to 2047, according to specialists' forecast sale of electronic cigarettes will exceed sales of traditional cigarettes. Tobacconists suffocated with high excise taxes on usual cigarettes, have found a niche here for themselves as well. However, it is till the moment while authorities will no start suffocating with taxes players of this market segment.

As while sale of electronic cigarettes is imposed with the same tax as, for example, pencils. And it is profitably for tobacconists. It allows compensating somehow not just decreasing sales but also loss of profit because of black market appearance. For example, in average 11 % of consumed cigarettes is contraband, i.e. is illegally imported from countries will lower taxes or are counterfeit. Particularly, in New York share of such cigarettes reaches 61 %, in Arizona - 54 %, New Mexico - 53 %.

That is why tobacco giants continue developing market of electronic cigarettes and will be glad even about ban of their online sales and advertising while authorities haven't started to suffocate them with high taxes.


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