The Commission proposes to phase in a tax increase on classic tobacco products over a four-year transition period. It expects to bring billions of euros to member state coffers; 15 per cent of the extra revenue is to go to Brussels as part of the Commission’s push for new “own resources“. Some states have signalled their opposition, saying the tax is both wrong and counterproductive.
Revenue from the tobacco tax is to increase by around €15bn a year. This is provided for in the proposal for a Council Directive, which the College of EU Commissioners adopted at its meeting on July 16. The tax applies to cigars, cigarillos, water pipes and other smoking tobaccos. The Commission expects that this would significantly increase the member states’ income from excise duties.
The tax is to apply to new products, too. The Commission is also proposing to subject new products, such as e-cigarettes and heat-not-burn, to the minimum tax. This would generate new tax revenue of between €900m and €1.7bn per year for the member states.
Astonishment and reticence
Member states are to transfer part of the tax to the EU. In its proposal for the next Multiannual Financial Framework (MFF), the Commission has proposed that the member states transfer 15 per cent of the proceeds from the tobacco tax to Brussels as new EU own resources. Member states discussed the Commission’s proposal for the first time on July 22 at the meeting of the Council Working Party on Own Resources.
It was reported that the member states reacted with a mixture of astonishment at the nature and scope of the proposals and reticence, given the difficulties in assessing the consequences for their own contributions. Greece, Italy, Romania, and Portugal have also expressed their opposition to the Commission’s plan. The Portuguese government has issued a statement expressing reservations about both the proposal to revise EU tobacco legislation and the plan to impose an additional tax.
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Portugal has reservations about applying equal taxation to cigarettes and other forms of smoking that are less harmful to health. – Portugal’s government
The revised Tobacco Taxation Directive (TTD) features sharp increases in tobacco taxes across the EU. In Portugal, the price of a pack of cigarettes would increase by €1.22.
Less harm is still harm
According to Lisbon, the proposal would result in a loss of national tax revenue of up to €1.5bn. Lisbon has pointed out that higher tobacco taxes could fuel black markets. The Portuguese government also objects to the notion that alternative tobacco products such as electronic cigarettes, heated tobacco and nicotine pouches would be subject to the same taxation as traditional cigarettes. “Portugal has reservations about applying equal taxation to cigarettes and other forms of smoking that are less harmful to health,” the Lisbon government was quoted by Euractiv.
Brussels disagreess on all three points. It has adopted the hardline position of the WHO that “less harmful is still harmful“. The Commission seeks to reduce illicit tobacco trade maintain through aligning prices through higher taxes across the bloc, and hopes the changes to raise money, not to lose it.
