SFP position paper: Tobacco taxes save lives: Smoke Free Partnership position paper on the revision of the EU Tobacco Tax Directive 2011/64/EU

Ángel López-Nicolás, Michal Stoklosa, J Robert Branston, Hana Ross, Luk Joossens, Deborah Arnott, Anca Toma, Irina Kubinschi, Nikoleta Arnaudova

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Abstract

Objectives of the paper
Taxation is one of the most effective policies to reduce tobacco consumption by preventing uptake and reducing consumption, reducing health inequalities, and increasing government revenues. The revision of the EU Tobacco Tax Directive 2011/64/EU (EU TTD) should explicitly recognise that, and in addition to improving the functioning of the Internal Market, EU tax legislation should strive to achieve the highest possible level of health protection and contribute to achieving Europe’s Beating Cancer Plan 2040 target:

 The European Beating Cancer Plan aims to reduce tobacco use by 30% by 2025 compared to 2010 to meet the United Nations Sustainable Development Goals and WHO targets and to achieve a tobacco free generation with tobacco use under 5% by 2040.

The EU TTD should also aim to achieve upwards convergence of taxes and prices of tobacco products in the EU internal market by decreasing the price differentials between member states that incentivize illicit crossborder shopping and undermine price policies in Member States.

SFP Policy proposals

1. Mechanisms of upwards convergence of prices at EU-wide and regional level for cigarettes and RYO/MYO

The EU TTD should put in place mechanisms to ensure a consistent increase in tobacco taxes across the EU and across all product categories, with an aim to decrease the difference in prices and increase the protection of public health between Member States

 A mechanism of upwards convergence of prices of cigarettes in the revised TTD through a European Weighted Average Price (EWAP) that would be used as reference for the minimum excise taxes on cigarettes. In the position paper, we propose different scenarios, including taking into account the differences in purchasing power between Member States. The approximation of taxes and prices will help reduce price differences, the disparities in health protection afforded by tobacco taxes, and the incentives for illegal cross-border shopping which undermined the health objectives of high-tax Member States.

 A requirement of equalising taxes on roll-your-own / make your own (RYO/MYO) tobacco to those of cigarettes, using the widely accepted conversion rate of 0.7 grams of fine cut tobacco per rolled cigarette. This would avoid tax induced substitution between the two products and would automatically subject RYO/MYO to the same process of upwards price convergence as cigarettes.

 (Upwards) convergence of taxes has already been an objective of the Tobacco Tax Directive but the evaluation published in 2020 showed that the TTD has reached its limit in achieving this objective and that further convergence required a revision.

2. Mechanisms of upwards convergence of taxes and prices across product categories

As a matter of principle, the EU TTD should strive to achieve upwards convergence of taxes on all tobacco products with those of cigarettes and roll-your-own (as described above) in order to encourage quitting and
discourage uptake.


In particular,

 The EU TTD should introduce a category and a minimum excise tax on heated tobacco products at an equivalent level to that of cigarettes on a per-unit basis considering the similar nature, profile and use of these products to cigarettes. Member States may wish to consider applying taxes to the devices used for heated tobacco.

 The EU TTD should introduce a tax category and a minimum specific excise duty for e-cigarettes and e-liquids. Member States should have maximum possible flexibility in using excise tax on e-cigarettes and e-liquids as a tool to support their public health objectives.

 The EU TTD should require Member States to introduce regular and substantial tax increases across all product categories, through mechanisms of indexation or tax escalators in order to support and protect the public health and revenue goals of tobacco tax increases, and to promote convergence of taxes and prices.

3. Tax administration measures to address illicit tobacco trade

The EU TTD should introduce a tax category for raw tobacco and relevant intermediate products, so that they are included in the excise system and covered by the control system (EMCS).

The EU and Member States should use the supply chain data in the EU tracking and tracing system to identify and address cross-border flows of tobacco products. To address the challenge of illicit cross-border shopping,
the EU TTD should allow Member States to:

 Introduce supply chain control measures to prevent and control disproportionate over- and undersupply of tobacco products to their markets and the diversion of these products into illicit cross-border trade. Such measures could include setting limits on the number of releases for consumption or on the number of Unique Identifiers for tracking and tracing commensurately with smoking rates and market shares, as recommended in Illicit Trade Protocol.

 Introduce regional mechanisms to compensate higher-tax countries for revenue losses due to illicit cross-border shopping. Such agreements exist both between EU countries (e.g. BELUX) and between EU and neighbouring countries (e.g. EU-Ukraine Association agreement)

 Subject tobacco supply chain operators in their jurisdictions (from growing to retail) to licensing requirements.
Original languageEnglish
Number of pages28
Publication statusPublished - 23 Jun 2021

Keywords

  • Tobacco
  • Taxation
  • EU
  • European Union
  • Directive

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