EU Wants to Raise Tobacco Duty

Source from:  by Vanessa Macdonald - editorial@di-ve.com 17 July 2008 07/18/2008

Its proposed directive also updates the definitions of different types of tobacco products so as to remove loopholes which allow certain cigarettes or fine cut tobacco to be presented as cigars, cigarillos or pipe tobacco and therefore benefit from a lower tax rate. It also aims to contribute to reducing tobacco consumption by 10 per cent within the next 5 years. According to the World Bank, price increases in tobacco products are the most effective single intervention in preventing smoking. At present, there are considerable differences in taxation levels between the lowest and the highest taxing member states. For cigarettes, the difference can be up to almost 600 per cent of the excise burden expressed in euros. Currently, excise duties levied on cigarettes must account for at least 57 per cent of price, and must be at least €64 per 1,000 cigarettes, for products falling under the "most popular price category" in that country. The Commission proposes replacing the most popular price category with a weighted average price of all cigarettes for determining the tax base. In order to underscore health objectives it will be combined with a monetary minimum tax applicable to all cigarettes. The current percentage of 57 per cent will be increased to 63 per cent of the weighted average price and the rate of €64 will rise to €90 for all cigarettes by 2014, under the new proposal. Between 2002 and 2006, the consumption of cigarettes decreased by more than 10 per cent but, in parallel, the consumption of fine-cut tobacco increased by around 10 per cent in the EU-25. To address this problem, the Commission proposes a partial alignment of the minimum rate for fine-cut tobacco to the minimum rate for cigarettes. Enditem