Finance Minister Michael McGrath held off on introducing a new tax on vaping amid fears it might put off smokers who were using e-cigarettes to help break their habit.
In a pre-budget submission, officials from the Department of Finance said there needed to be a delicate balance to both discourage young people from vaping while also supporting existing smokers who were looking to give up.
The Department of Health had also recommended that e-cigarettes be taxed differently to traditional products based on their "comparative health harms versus tobacco products".
The health department had advised too that any new tax on e-cigarettes should be ring-fenced for use in tobacco control and to help further reduce rates of smoking in Ireland.
The Department of Finance's pre-budget submission explained how there were challenges involved in taxes on vaping as there had been little progress at EU level on how to levy duty on them.
"It is a complex tax to implement without an EU framework however, so this will take some time to design and operationalise," the submission said.
Minister McGrath was told as well that any increase in duty on cigarettes and other tobacco products was unlikely to bring in any extra income as smokers would switch to alternatives, both legal and illegal.
It said the latest survey had shown that use of illicit products or packets sourced in other EU countries was at its highest ever level and was costing the state an estimated €415m each year.
The finance minister also decided to leave taxes on alcohol untouched despite lobbying from the drinks industry who wanted to bring Irish rates of duty in line with other EU countries.
The pre-budget submission said the aim of high taxes was to reduce consumption in Ireland to the EU average of 9.1 litres pure alcohol per year.
While the volume of booze consumed by Irish people had fallen by 2021 to 9.5 litres, it rose up again during 2022 to 10.2 litres.
The submission added: "It should be noted however, that since 2014 excise duty as a percentage of the retail price has fallen across all products, falling from below 12% of retail price for beer or cider to below 10% for the on-trade".
"It has remained nearly static for the off-trade [off-licences]. There has been no change in the excise on alcohol since 2014," it added.
Separately, the minister was told that a hike in betting duty was unlikely to bring in significant income with a 0.5% increase yielding just €26m extra in revenue for the Exchequer.
Officials said previous increases had been vigorously opposed by the bookmaking industry who warned of the devastating impact on small operators.
The pre-budget submission said it was difficult to gauge how accurate this was as the Covid-19 pandemic had caused dramatic changes in betting habits.
"While some smaller, independent retail operators may be acutely impacted by betting increases, it should be noted that this portion of the market has been shrinking as betting activity has been consolidating around a very small number of large bookmaking operations," it stated.
In notes on the submissions, Minister McGrath said he wanted to proceed with a 50 cent increase in the price of cigarettes, which was subsequently upgraded to a 75 cent hike on Budget Day.
Mr McGrath wrote: "I do not wish to increase the betting duty. I do not wish to introduce any changes to excise rates on beer, cider, spirits and wine."
Reporting by Ken Foxe
