Commission opposes excise tax on e-cigarettes and novel tobacco products, for now

The European Network for Smoking and Tobacco Prevention (ENSP) regretted the delay to the harmonisation of taxes on e-cigarettes and heated tobacco. [Bedya/Shutterstock]

Updated with new quotes from British American Tobacco responding to ENSP

Due to limited data, the European Commission has decided not to propose a harmonised approach for excise taxation of e-cigarettes and other novel tobacco products until further information about these products is available.

The EU executive stated that it would re-examine the situation in the next regular report on tobacco taxation due in 2019.

In light of the tobacco market’s shift away from traditional tobacco, driven by the rise of new products such as e-cigarettes and so-called “heat not burn products”, as well as the new developments in the illicit tobacco trade, the EU Council asked the executive in March 2016 to come up with a proposal on the revision of the Tobacco Excise Directive.

This legislation sets out harmonised rules on the rates of excise duty applied to manufactured tobacco on an EU level.

Electronic cigarettes and other novel tobacco products are not currently covered by the directive and the member states asked the Commission to conduct a study to explore the possibility of imposing excise taxes.

According to the Commission, due to lack of sufficient information, no excise tax should be imposed on either e-cigarettes or novel tobacco products.

Limited information

Regarding e-cigarettes, the Commission stressed the information available was limited and therefore, it was difficult to make projections for the future evolution of the market.

The EU executive pointed out that there were several opinions about the health effects of e-cigarettes, as well as their appropriate tax treatment.

“From a health perspective, a cautious approach should be adopted towards a potential harmonised taxation of e-cigarettes,” the Commission’s report emphasised.

According to the industry, the consumption of harmful chemicals from “heat-not-burn” tobacco or heat tobacco is significantly reduced compared to cigarette smoke, since the tobacco does not burn but gets heated at a lower temperature.

The Commission underlined that by 2016, these products had entered only a few member states’ markets.

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“Given the novelty and evolutionary nature of the market, it would be extremely difficult at this stage to develop a harmonised explicit definition which captures these products both as they appear now and their future developments,” the Commission noted, adding that a possible treatment of these products would be to tax them at the same rate as smoking tobacco under the directive.

The news, as was expected, did not please anti-smoking campaigners, who insist on the effectiveness of taxation.

In a written reply to EURACTIV, the European Network for Smoking and Tobacco Prevention (ENSP) regretted the delay to the harmonisation of taxes on e-cigarettes and heated tobacco.

The public health organisation referred to a World Health Orgsanisation report (August 2016), which claimed that there were possible risks from active and passive exposure to electronic cigarette vapour.

It also expressed serious concerns that those novel products could serve to initiate young people into smoking.

“However, we know that taxation is the best measure to prevent people from taking up smoking, especially children and vulnerable populations. An EU level harmonisation of excise taxes will decrease the affordability and attractiveness of those products. Therefore ENSP worries that the longer we wait to regulate those novel products, the more opportunities we give the tobacco industry to recruit new consumers,” ENSP warned.

On the other hand, the industry expressed its satisfaction with the Commission’s decision, highlighting the difference between the new products and traditional tobacco.

Giovanni Carucci, Vice President – Head of European Affairs at the British American Tobacco (BAT), told EURACTIV that e-cigarettes shouldn’t be part of the excise directive because they don’t contain tobacco. Instead, they should be treated as a normal consumer product, subject simply to VAT as is the case in the majority of EU countries such as the UK, Germany, France and Spain, he claimed.

“Many scientists and public health professionals are supportive of e-cigarettes and leading public health bodies have said that current best estimates suggest e-cigarettes are around 95% less harmful than smoking,” Carucci emphasised.

“This is widely understood to be because it is the burning of tobacco that causes the majority of harm, and not nicotine. Incentivising smokers to switch to e-cigarettes makes sense because of the potential to lead to an unprecedented public health success. If e-cigarettes are subject to additional duty, this may put the products out of reach of many consumers,” he added.

Public Health England (PHE), an executive agency of the Department of Health in the United Kingdom, published in 2015 a report suggesting that e-cigarettes are around 95% less harmful than tobacco.

Similarly, the NHS Health Scotland noted last September that electronic cigarettes were “definitely” less harmful than smoking.

But Vytenis Andriukaitis, EU Commissioner for Health and Food Safety, opposes e-cigarettes being advertised as another ‘cool’ thing to attract young smokers, reminding they must also carry a health warning.

“I am against e-cigarettes being advertised as another ‘cool’ thing to do attracting the youngest […] this is just not acceptable,” he told EURACTIV in February 2017.

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