The European Commission was asked by European Finance Ministers to draft an “appropriate legislative proposal” for increasing taxes on e-cigarettes that are currently taxed by ±20% Value Added while tobacco products are taxed by±57%.
The e-cigarette is still not categorized in any special taxable category
On March 8, 2016, European Finance Ministers meeting in Brussels agreed that the exemption from excise duties for the tobacco products should be reconsidered. They asked the European Commission to decide by 2017 whether to propose increasing taxation on e-cigarettes while maintaining the “right balance between the revenue, expenses of tax administration and public health objectives”.
Last February, the Council examined the Directive 2011/64/EU of 21 June 2011 that addresses the structure and rates of excise duty applied to manufactured tobacco. The Ministers drafted their conclusions for a solution for excise taxation of “e-cigarettes, heated tobacco, other novel tobacco products and, where relevant, of products related to tobacco products”.
The Spokesman commented: “It would be extremely unlikely that we would propose to apply the same taxation levels on e-cigarettes as those applied to cigarettes”.
Among other things, the Ministers observed “that some of the products, such as e-cigarettes (…) do not fall into any of the categories of products subject to excise duty”. Therefore “should the market share of such products show a tendency to increase, the ongoing efforts to develop an efficient taxation method for such products would have to be intensified.”
They asked the Commissions “to examine possible ways forward towards the introduction of new product categories or definitions”.
This is, according to the Council, in order to “facilitate an appropriate, equal taxation treatment of new products within the internal market and remove potential inconsistencies and legal uncertainty”.
Austria, Finland and France stressed “the need to achieve a closer convergence of excise duty applied to manufactured tobacco towards the highest common denominator”. They proposed to start working on a future revision of the minimum rates without delay since a lot has to be done, from scientific studies to public inquiries and impact assessment,before submitting an appropriate legislative proposal to the Council.