At the moment, the ‘tobacco’ tax situation in the EU is still fragmented as different Member States have imposed different tax rates on different products. In February 2020, the executive issued a report indicating that this lack of unity is a cause for concern from a single market perspective.
Although electronic products in the health context are regulated by the Tobacco Product Directive (TPD), there is still no EU-wide tax framework for the products. In 2017, the EU asked for consultations on a proposed revision of the TED that would have included such a tax.
“The current provisions of Directive 2011/64 / EU are no longer effective because they are either insufficiently or too narrowly drafted to address current and future challenges for some products such as e-cigarette liquids, heated tobacco products and others to face types of next generation products coming to market, ”reads a draft Council conclusions cited by EURACTIV.com.
“It is therefore urgent and necessary to improve the EU legal framework to address current and future challenges with regard to the functioning of the internal market by harmonizing the definitions and tax treatment of novel products (e.g. tobacco products), including nicotine-containing or non-nicotine-containing products, replace tobacco in order to avoid legal uncertainty and regulatory differences in the EU ”, the draft continues.
Taxes should be relative to risk
Many health experts and tobacco control organizations had spoken of the consequences of such a tax. It was suggested that including safe tobacco alternatives in a Flammable Tobacco Products Directive, as in the case of the TPD, would only create confusion among the public.
Donato Raponi, Honorary Professor of European Tax Law, Former Head of the Excise Unit and Tax Law Advisor, wrote about the fact that EU member states recently, through the Council, called for the inclusion of a number of new products in the TED of the EU. This includes “e-cigarettes that do not contain tobacco but contain nicotine. But there are also e-cigarettes without nicotine and their fate is unclear, ”explains Raponi.
Is this directive going too far?
The tax expert goes on to raise the question, rightly, of whether the extension of a directive that was intended for tobacco has been extended to products that contain neither tobacco nor nicotine is going too far. “The EU regulations1 clearly state that products should only be included in the TED in order to ensure the smooth functioning of the internal market and to avoid distortions of competition.”
“It is by no means clear that a Europe-wide harmonized excise duty treatment of nicotine-free products such as nicotine-free e-liquids will help to alleviate such distortions. There is very limited evidence of the extent to which consumers see non-nicotine e-liquids as viable substitutes for nicotine-containing e-liquids, ”he explains.
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