New EU tax plans for tobacco

Commission proposes Directive introducing radical revisions to rates and structure of excise duties on tobacco

The European Commission announced plans on 15 March to impose an EU-wide tax on tobacco products in an effort to lower disparities between Member States' duty rates on cigarettes and curb smuggling. The Commission wants to introduce a fixed amount of excise duty of 70 euro per 1000 cigarettes in the most popular category.

The Commission made these proposals in light of the fact that differences in duty rate across the Union disrupt the smooth functioning of the Internal Market. In addition, it will be harder for organised crime to exploit the disparity of duty rates among Member States when smuggling cigarettes across borders.

The proposal for a Directive would raise duties on rolling tobacco over the next three years, bringing it into line with cigarette duties. The duties on rolling tobacco are almost 30 percent lower than those on cigarettes. The proposal also changes the definition of cigarillos and cigars to allow tax-breaks for hand-made cigars.

The new Directive has to be adopted unanimously by Member States. The new tax would lead to increases in tax levels of up to 35 percent in Spain, Portugal, Italy, Luxembourg and Greece where duties were previously lower than most EU states. The average EU duty per 1000 cigarettes is 90 euro. The lowest duty on cigarettes in the EU is 48 euro per 1000 compared to the highest rate of 210 euro per 1000 cigarettes.

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