The European Finance Ministers discussed the proposal for directives on excise duties and the general arrangements applicable to tobacco and tobacco products on Friday 10 October in Luxembourg. While there is broad agreement on extending the scope of application, there is disagreement on introducing a harmonised minimum rate of excise duty.
Announced in July (see EUROPE 13683/15), this proposal would not only generate new tax revenues (see EUROPE 13682/1), but would also support public health and anti-smoking policies.
Wopke Hoekstra, European Commissioner for Taxation, began by issuing a reminder of recent figures from the World Health Organization: “Europe is again at the very top of the list of smokers worldwide. So the overall decline in other places has been such that again we are on the very top of it”. “Around 40% of the decline in smoking that we have seen in the EU in the past decade can be attributed to taxation”, he added. He also warned that vaping is “deliberately targeted at kids the age of 11, 12, 13”.
However, the inclusion of one product does not meet with unanimous approval: nicotine sachets, also known as ‘white snus’ in Sweden, where they are widely consumed. While tobacco-based “brown snus” cannot be taxed under Sweden’s EU Accession Treaty (see EUROPE 13711/17), ‘white snus’ is not covered by this exemption. “We think this is unreasonable [..] that the white snus, as the Swedes call it [is] supposed to be taxed at the same level as smoking tobacco”, said Swedish minister Elisabeth Svantesson. “And we have a very clear principle in Sweden. We tax on the basis of danger. And we think that this should continue to apply”, she argued. She did not convince her Finnish counterpart, Riikka Purra, who believes that these little bags of ‘snus’ should be included in the review.
Harmonisation or taking account of national characteristics. However, it was above all the level of taxation that divided the ministers. For the calculation of excise rates, the Commission has also proposed moving from nominal rates to an approach partly based on purchasing power parities. This means that excise rates would be partly calculated on the basis of the Member State’s price level index. While Slovakia has come out in favour of this approach, Sweden and Luxembourg are opposed. “It conflicts with the objective of tax harmonization within the internal market and creates unequal treatment between member states”, argued Gilles Roth from Luxembourg.
For heated products, the Croatian minister, Marko Primorac, considered that “Member states should have the flexibility to express minimum excise as per kilogram per number of items or as percentage of retail price, depending on national circumstances”. But for liquids, regardless of nicotine level or concentration, he wants prices to be harmonised to avoid any difficulties between Member States.
Limiting the risk of fraud. Furthermore, the considerable increase in the rates proposed by the Commission has worried ministers about the risk of fraud. “We believe that the proposed levels for traditional tobacco products are excessively high [which] will have a negative impact, not only to Bulgaria, but also for the single market”, warned Temenuzhka Petkova, the Bulgarian minister. Her Croatian, Romanian and Lithuanian colleagues put forward the same argument.
“We need to keep revenues while at the same time controlling the traffic in these new tobacco products. There is no certainty about this combination”, emphasised Italy’s Giancarlo Giorgetti.
Many ministers have also called for a longer transition period.
Discussions will continue at technical level. (Original version in French by Anne Damiani)