EU member states will ask the European Commission this week to place novel tobacco products, electronic cigarettes and heated tobacco products under the EU Tobacco Excise Directive, meaning they would be taxed just like traditional tobacco products, according to draft Council conclusions seen by EURACTIV.com.
“The current provisions of Directive 2011/64/EU have become less effective, as they are either no longer sufficient or too narrow to address current and future challenges, concerning some products, such as liquids for e-cigarettes, heated tobacco products and other types of next-generation products, which are entering the market,” the draft conclusions read.
“It is therefore urgent and necessary to upgrade the EU regulatory framework, in order to tackle current and future challenges in respect of the functioning of the internal market by harmonising definitions and tax treatment of novel products (such as liquids for e-cigarettes and heated tobacco products), including products, whether or not containing nicotine, that substitute tobacco, in order to avoid legal uncertainty and regulatory disparities in the EU,” the conclusions add.
The Council Conclusions are expected to be endorsed tomorrow (27 May) at a COREPER II meeting.
EU member states also ask the EU executive to present a legislative proposal to the Council, with the objective of “resolving, as appropriate, the concerns set out in these conclusions”.
Although novel tobacco products are regulated under the Tobacco Product Directive focusing on the health aspect, there is currently no EU-wide excise framework as there is for traditional tobacco products.
The situation in the EU single market is quite fragmented, as some member states tax e-liquids and heated tobacco products at different rates while others do not tax them at all.
In January 2018, the lack of sufficient data prompted the European Commission not to propose a harmonised approach for excise taxation of e-cigarettes and other novel tobacco products until further information about these products was available.
However, in February 2020, the executive published a report suggesting that for recent and new products, the lack of harmonisation is a source of concern from the internal market perspective.
“On the market side, developments have accelerated within new e-cigarettes, heated tobacco products and a new generation of modern products are coming into the market (containing nicotine or cannabis),” the report read.
“The current lack of harmonisation of the tax regulatory framework for these products is also restricting the possibility to monitor their market development and control their movements,” it added.
The tobacco industry says novel tobacco products and electronic cigarettes have significantly reduced health risks compared to traditional smoking and should therefore be treated accordingly.
On the other hand, EU policymakers insist that they are still harmful, albeit, perhaps, a little less than cigarettes, and all these years have adopted a cautious approach.
The next challenge will now be the pressure that the tobacco industry is expected to put on national governments in order to get the lowest excise tax possible.