57% Excise Duty on e-cigarettes? EU countries prepare legislation to tax like tobacco products

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europe callingEU countries are preparing to tax e-cigarettes under the same regime as normal cigarettes, in a move likely to increase prices and to prompt a fight among corporate lobbyists in Brussels. Last Friday (26th February), member states’ ambassadors agreed to take the first step by asking the European Commission to draft an appropriate legislative proposal in 2017.
The project will be endorsed without discussion when the bloc’s finance ministers meet on 8 March. The ministers’ draft conclusions said that e-cigarettes, as well as other novel products, could cause “inconsistencies and legal uncertainty” in the single market if they remained exempt from excise tax. They also said excise duties or some “other specifically designed tax” on novel tobacco items, which use steam instead of smoke to put nicotine into people’s lungs, could help meet “public health objectives”. They added that work on the new tax regime should be “intensified” if “the market share of such products show a tendency to increase”.
Prices will rise
Global e-cigarette sales were about €7.5 billion last year, but analysts forecast they will grow to €46 billion by 2025-2030. Under existing rules, all EU countries must impose an excise tax of at least 57 percent on tobacco products, but most impose only VAT on e-cigarettes at a level of about 20 percent. In the UK the excise and VAT burden sees the state collect £6.17 every time someone pays the recommended retail price of £7.98 for a pack of 20 premium-brand cigarettes. The excise income alone is worth €15.5 billion a year.
One EU official said it was “self-evident” that the price of e-cigarettes would go up if the commission went ahead. A second official said it was “too early to say what effect the review” of excise rules might have on prices. The ministers’ draft conclusions noted that the commission was not obliged to go ahead. But the draft text said EU states would want “reasons” if it did not act. With several EU capitals still struggling to balance the books, the commission in a report in December also said e-cigarette taxes could have “significant long term budgetary implications” for national treasuries.

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Lobbying war
One of the EU officials said the next steps would be “to undertake studies, carry out impact assessments and a public consultation”, setting the stage for a new lobbying war in Brussels. The last time the EU regulated e-cigarette sales, in 2014, big tobacco firms led by Philip Morris International tried to dilute legislation on grounds that e-cigarettes help people to quit smoking. They did it because they were buying up e-cigarette makers to protect their profits.
Firms joined them in what Olivier Hoedeman from Corporate Europe Observatory (Brussels-based NGO) called an “angry” campaign with “very strong emotions”. One MEP at the time got an email saying she would be “finished” if she obstructed ecigs’. EUobserver received emails saying it would be responsible for smokers’ deaths if published stories gave credence to claims that ecigs’ were bad for your health.
On the other side, pharmaceutical giants such as GlaxoSmithKline lobbied for tougher EU rules on the grounds that e-cigarettes encouraged young people to start smoking. They did it because they make nicotine gums and patches, which compete with e-cigarettes for people trying to give up. But gums and patches are regulated under more exacting EU medical product standards. They were joined by companies such as Trierenberg-Gruppe, the world’s top producer of cigarette papers. Read full article
View/download EU Draft Council Conclusions

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Andrew Rettman (01 March 2016) E-cigarette tax sets the scene for EU lobbying war [editorial]. Retrieved from http://bit.ly/1OLeppu

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