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Brussels to propose rise in cigarette taxes and first EU-wide vaping levy

The EU is to propose a bloc-wide vaping levy as part of a shake-up of taxation on the tobacco industry that would also double excise duties in member states with low cigarette taxes, according to a draft European Commission document.

The changes to legislation, part of a push by Brussels to cut smoking rates, will increase the EU’s minimum excise duty on cigarettes from €1.80 to €3.60 per pack of 20, which would raise prices in eastern European nations where packs can sell for under €3.

The update to the 2011 EU tobacco taxation directive will also bring the taxation of novel smoking products, such as vapes and heated tobacco, into line with cigarettes, as policymakers worldwide take an increasingly dim view of the new products’ popularity among young people.

Stronger vaping products would have an excise duty of at least 40 per cent applied to them, while lower-strength vapes will face a 20 per cent duty. Heated tobacco products will also be hit by 55 per cent duty, or a tax rate of €91 per 1,000 items sold. Alberto Alemanno, professor of EU law at HEC Paris business school, said the absence of an EU-wide excise framework for vapes and heated tobacco had been “weakening tobacco control efforts” across the bloc.

Excise duties on cigarettes would also increase considerably in countries such as Austria and Luxembourg where prices are low relative to income. The tax rise on cigarettes is expected to generate an extra €9.3bn for EU member states. The changes aim to speed up the EU’s push for a “tobacco-free generation” by 2040.

As part of the EU’s Beating Cancer Plan, health officials want to drive tobacco use among EU citizens from the current level of about 25 per cent down to 20 per cent in 2025, and below 5 per cent by 2040. The commission this month imposed a ban on flavoured heated tobacco products to curtail a surge in demand among younger consumers. In the US, regulators at the Food and Drug Administration have moved to ban popular vaping products, such as Juul.

Rob Branston, senior lecturer in business economics and a member of the University of Bath’s Tobacco Control Research Group, said the tax regime update was “long overdue” to increase prices in countries where cigarettes were “too cheap” and to catch up with inflation.

“This will save lives,” he said. “Tax-induced price increases are . . . one of the most effective tools for reducing tobacco use, so significant increases in minimum tax rates . . . are crucial to attaining the desired reductions in cancer and other illnesses.” But Peter van der Mark, secretary-general of the European Smoking Tobacco Association, an industry body, warned that “if you have a sudden very steep increase, you can create a market for illicit trade”.

Dustin Dahlmann, president of the Independent European Vape Alliance, added that imposing taxes on novel tobacco products could lead to “the much less harmful alternatives” to smoking being “taxed far too heavily in many countries”.

A leaked impact assessment said that the increase in the minimum excise duty would have “a strong impact on consumers and economic operators” in EU states where cigarette prices were low, including Bulgaria, Slovakia, Poland and Hungary. The assessment also noted that the excise duty on novel tobacco products “which are particularly appealing to young people, who are at risk of developing addiction” would aid public health efforts to cut tobacco use.

The proposal will have to be agreed by all EU member states before it is enshrined in law. British American Tobacco, one of the world’s biggest cigarette manufacturers, stressed this was “the beginning of a long legislative process”. The commission did not reply to a request for comment.

Source : FinancialTimes