Euro MPs Back Harmonized Tobacco Taxes

by Ulrika Lomas, Tax-News.com, Brussels

03 March 2009

A gradual increase in minimum tax rates on cigarettes, to at least EUR1.50 per pack by 2014, and other tobacco products, was backed by a European Parliament committee on March 2, but it advocated smaller increases than those proposed by the European Commission.

The aim of the proposed legislation, approved by Parliament's Economic Affairs Committee, is to avoid distorting the single market and to foster tax convergence, with tobacco tax rates currently differing across EU member states. The committee also cited the public health benefits of the proposed move.

Convergence would be fostered by applying the same minimum requirement to cigarettes and other tobacco merchandise. The increases, if approved by the European Council, would be introduced gradually, ending on January 2014.

The committee agreed that the minimum tax on cigarettes should be EUR64 per 1,000 cigarettes from January 2012 onwards. But from January 2014, the committee proposes that the minimum tax should be EUR75 per 1,000 cigarettes, less than the EUR90 proposed by the Commission. This would make the minimum tax EUR1.50 per pack of 20 cigarettes from 2014.

The proposal also aims to bring minimum tax rates for fine-cut rolling tobacco into line with the rate for cigarettes. For this tobacco, the committee proposes minimum tax rates of EUR43 per kilogram from 2012 and EUR50/kg from 2014 (for the latter step, the Commission had proposed EUR60/kg).

For cigars and cigarillos, the Economic Affairs Committee advocates minimum rates of EUR12/kg from 2012 and EUR22/kg from 2014.

Whereas the Commission proposed increasing the minimum rates for tobacco products in two steps, one from 2010 and the other from 2014, the committee has agreed on 2012 and 2014.

As is usual with taxation issues, Parliament's views are advisory rather than binding and the final decision is for the member states, acting unanimously.

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