Brussels, 12/02/2002 (Agence Europe) - Without debate on Tuesday, the ECOFIN Council adopted the directive harmonising excise duty on tobacco, ignoring the amendments adopted by the European Parliament (in its purely consultative role) in its opinion of 5 February 2002 (see EUROPE of 6 February, p.6). This means that the ministers formally endorsed the text that was drafted by the 6 November ECOFIN Council.
The minimum excise duty for cigarettes had been set at EUR 60 per thousand cigarettes and this will apply from 1 July 2002, rising to EUR 64 as from 1 July 2006. The total excise duty on cigarettes (a combination of specific duty and ad valorem) should make up at least 57% of the retail price (including tax). The directive sets out a series of derogations to this rule. Member States for which the immediate introduction of the fixed minimum duty would be difficult for economic reasons are allowed to not apply the EUR 60 rate until 1 January 2004. Spain and Greece have both been granted derogations until 1 January 2008 for the EUR 64 rate. Member States that already levy high rates (at least EUR 95 on 1 July 2002 and EUR 101 on 1 July 2006) do not have to respect the 57% rule.
The text changes the definition of cigarillos since cigarillos that look like cigarettes will now be dealt with in the same way as cigarettes proper. Germany is the main market for cigarillos - it has been granted a derogation until 1 January 2008 for applying this definition.
Considering that both forms of tobacco are bad for health, the directive sets rules for gradually harmonising excise duty on rolling tobacco to bring it in line with cigarettes. Rolling tobacco will be taxed at a minimum rate of 32% of the retail price (or EUR 27 per kilo) from 1 July 2002, rising to 33% or EUR 29 per kilo on 1 July 2003 and 36% or EUR 32 on 1 July 2004.