15 EU Countries Call on Commission to Set Minimum Tax Rates for E-Cigarettes, Nicotine Pouches, and Heated Tobacco

Key Points:

1.Fifteen EU countries, including Germany, France, Spain, and Czech Republic, have written to EU Commission President von der Leyen urging her to expedite the first revision of the Tobacco Tax Directive since 2011.

2.The letter calls for the establishment of a lower tax rate for new products such as e-cigarettes, nicotine pouches, and heated tobacco, while significantly increasing the consumption tax on cigarettes and cigars to address health challenges and illegal trade.

3.The directive, originally scheduled to be introduced in 2022, has been put on hold due to concerns about inflation. EU officials have now stated that they will introduce a new proposal "soon," but it still needs to be unanimously approved by member countries.

4.Some countries, such as Italy, Greece, and Romania, are among the few EU countries that oppose the bill. They argue that smoking rates have already decreased in their countries, and they are also major tobacco producing nations.

According to a report from the UK's Financial Times on May 26, 15 countries including Germany, France, Spain, and the Czech Republic have written to European Commission President Ursula von der Leyen requesting her to "take immediate action to update the Tobacco Tax Directive," which was last revised in 2011.

The Financial Times reported that the letter stated that these countries are hoping she can clear the proposal that has not yet been adopted by the commission which sets a minimum tax rate for the first time for e-cigarettes, nicotine pouches, and heated tobacco. The proposal also seeks to significantly increase the minimum consumption tax rates for cigarettes and cigars to harmonize taxes across the European Union and reduce tobacco smuggling.

Finance and economy ministers from 15 European Union countries wrote in a letter that:

"The current scope and provisions of the directive are insufficient for member states to address the significant challenges brought by the continued development and trends in the European tobacco market, including the emergence of new products."

According to the European Anti-Fraud Office (Olaf), annual losses of up to 10 billion euros are incurred due to health issues caused by tobacco and illegal trade. Tax Commissioner Wopke Hoekstra will push for the passage of this legislation.

"The tobacco tax regulations are no longer applicable. We are considering proposing amendments to these rules," the committee stated.

The bill was originally scheduled to be passed in 2022, but the committee delayed its approval due to concerns about high inflation rates. Since then, the annual inflation rate has slowed down, dropping to 2.2% in April of this year.

European Union officials have stated that they expect a proposal to be introduced "soon." However, the bill still requires unanimous approval.

Italy, Greece, and Romania are among the few European Union countries opposing the legislation, stating that there is no need to "continue... a comprehensive revision of EU legislation as a whole." They argue that smoking rates have already decreased, but they are also major tobacco-producing nations.

The Financial Times reported that the initial proposal for 2022 plans to increase the minimum excise tax on cigarettes by 100%, loose tobacco by 200%, and cigars and cigarillos by 900%. The minimum tax rates may change in the final proposal.

Because the EU directive sets a minimum excise tax rate, it will not affect countries that already have tobacco tax rates set higher than the proposed EU rate.

2Firsts noticed that three more countries have signed the joint letter of support. Earlier, Dutch media reported that 12 European countries led by the Netherlands are jointly urging the European Commission to revise current tobacco regulations. They warned that the current regulations do not cover new nicotine products and are unable to adapt to the rapidly changing market landscape, thus necessitating an update.

The 12 countries are the Netherlands, Belgium, Estonia, Finland, France, Ireland, Latvia, Lithuania, Luxembourg, Malta, Slovenia, and Spain.

This time it is noted: Germany and the Czech Republic.