Brussels, 10/10/2014 (Agence Europe) - In a ruling in Case C-428/14 on Thursday 9 October, the European Court of Justice ruled that member states must not apply different rates of excise duty to cigarettes based on their retail price because this would create an uneven playing field. The Court of Justice ruled that Italy's levying of a 15% higher minimum excise duty on low-cost cigarettes than the most popular cigarettes breaks EU law.
EU Directive 2011/64/UE on excise duty on manufactured tobacco products stipulates that the rate of the proportional excise duty and the amount of the specific duty levied by member states must be the same for all cigarettes. A minimum level of excise duty can be introduced, but this is optional. If member states decide to levy the minimum rate, they must do so without introducing discrimination between different types of cigarettes on the basis of their characteristics or price.
In Italy in 2012, the autonomous state monopoly body (AAMS) set a 15% higher minimum excise duty for cigarettes that retail at less than the most popular cigarettes. This means that the retail price for the most popular cigarettes is €210 per thousand, of which excise duty is €122.85, whereas for cigarettes that retail at less than €210 per thousand, the minimum excise duty is €141.28.
The Court of Justice says that setting a mimium excise duty for one group of cigarettes that is higher than the duty levied on another group clearly creates an uneven playing field and acts against the objective of the EU Directive (which is to ensure the proper functioning of the single market and neutral conditions for competition). “Taxation is an important and effective instrument for discouraging consumption of tobacco products,” notes the Court of Justice, but the directive takes this into account by allowing taxation to be used to protect public health without introducing discriminatory excise duty. (JK)