EU To Raise Minimum Tobacco Tax Levels

by Ulrika Lomas, Tax-News.com, Brussels

09 November 2001

Earlier this week, the EU Ecofin meeting approved increased minimum tobacco taxes aimed at narrowing the differences between member states in order to reduce the scope for fraud and smuggling.

"I'm very pleased that the council has reached unanimous political agreement on this important revision of the EU rules on tobacco taxation," Internal Market Commissioner Frits Bolkestein told a press conference.

"That proposed directive on excise taxes on tobacco products would ensure a fair and reasonable level of taxation on all tobacco products sold in the European Union, and in particular it would help... to tackle fraud and smuggling between member states... by narrowing the differences in taxation among the states," he added.

Under the plan, the minimum excise duty per 1,000 cigarettes will rise to 60 euros ($54) on July 1, 2002 on top of the existing minimum excise duty requirement of 57 percent of the retail price. Countries currently below that minimum - all the EU countries except the Britain, Ireland and Denmark - have the option of deferring the implementation of the new tax until January 1, 2005.

The plan is expected to pass smoothly through the European Parliament, although there is a chance that the committee's Greek rapporteur, who opposes it, may attempt to withhold an opinion, effectively stalling the proposal indefinitely.

The plan would also raise minimum taxes on cigars, cigarillos and smoking tobacco to adjust for inflation, and would ensure that products like fine-cut tobacco are subject to a similar level of taxation as cigarettes to reflect increasing health concerns.

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