17 July 2008

BRUSSELS - The European Commission wants to increase and harmonise taxes on cigarettes across the European Union in a bid to cut smoking and reduce tobacco smuggling.

According to a proposal presented on Wednesday by the EU's executive arm, the minimum percentage of excise duties applied on the price of cigarettes should be gradually increased - from today's 57 percent, to 63 percent by 2014.

"Today's proposal supports the EU policy to reduce tobacco consumption and narrow the differences in price levels of tobacco products within the EU," said Laszlo Kovacs, the EU's commissioner for taxation and customs union.

Raising the minimum tax level in all member states "will help reduce illicit trade and cross-border shopping, which undermine the revenue and the health objectives of member states which impose high taxes to deter smoking," he added.

Cigarette prices currently vary widely across the 27-member bloc - from an average of EUR 0.06 per cigarette (or EUR 1.20 for a packet of 20) in Latvia to EUR 0.40 cents (or EUR 8.10 per packet) in Britain.

Such price differences largely reflect the level of excise duty applied by member states on tobacco products, and contribute to the smuggling of cigarettes from low-priced countries in Eastern Europe to high-priced countries in the West.
The commission estimates that up to 20 percent of all cigarettes consumed in certain EU countries come from other member states where they are cheaper.

The commission also hopes that the rise in taxation will help cut tobacco consumption by 10 percent within the next five years.

According to a World Bank report, a 10 percent rise in the price of tobacco in rich countries leads to a decrease in consumption of about 4 percent. Young people are particularly sensitive to price rises, the report found.

The commission proposal, which must be approved unanimously by all member states, also aims to reduce the difference in price between ready-made cigarettes and hand-rolled tobacco. It also targets tobacco products that benefit from lower taxes by being marketed as cigars or cigarillos when in fact they are not.

A longer transitional period would be granted to those countries which still enjoy derogation from the current EU legislation. These are: Poland, Hungary, Slovakia, Romania, Bulgaria, Lithuania, Estonia and Latvia.
 
[dpa / Expatica]