EU Plans to Include Tobacco Tax in Long-Term Budget Revenue, Sparking Potential Member State Opposition

Key Points:

·The European Union is considering including tobacco taxes as a potential new source of revenue in the next long-term budget. 

·The EU is in need of additional income due to increases in defense and other expenditures, leading the Taxation Commissioner to propose raising tobacco taxes. 

·The proposal would require unanimous approval from member states, presenting a challenge. 

【2Firsts News Flash】According to a report by Euractiv on July 8, documents from the German government indicate that the European Commission is looking into introducing tobacco taxes as a potential new source of revenue in the next EU long-term budget.

A report cautiously submitted to the Parliament by the Germany Brussels International Affairs Liaison Office mentioned a new idea for raising funds for the EU, but this idea may trigger strong reactions from the tobacco industry.

The report discussed the first set of proposals put forward by the committee for the next Multiannual Financial Framework (MFF).

The document states, "We may also explore new sources of own resources, such as taxing e-waste or tobacco.

The term "own resources" refers to the main sources of income for the annual budget of the European Union. Currently, its main sources of income are the contributions and customs duties paid by EU member states.

However, given the need to increase spending on new priorities such as national defense, Brussels is actively seeking additional sources of income.

This document confirms a previous report by Euractiv, which highlighted that Wopke Hoekstra, the EU's commissioner responsible for taxation, has been advocating for an increase in tobacco taxes to support the EU budget. This is because the EU's enforcement departments are reluctant to further burden the emissions trading system (ETS).

Last month, Euractiv revealed the draft proposal of the European Commission to revise the Tobacco Excise Directive (TED), which suggests raising cigarette taxes by 139%. The European Commission is expected to hold interdepartmental consultations on the TED proposal on July 15, with the formal proposal to be submitted in the autumn.

Members of the European Union have imposed taxes on cigarettes through consumer and value-added taxes. However, it is currently unclear whether the European Commission wishes to introduce additional tobacco taxes at the EU level, similar to emissions trading systems (ETS), which would directly contribute to the EU budget.

The tobacco lobbying group has warned that increasing tobacco product taxes will only stimulate black market sales, reduce national income, and thus jeopardize efforts to provide funding for the EU's next long-term budget.

From a political perspective, the revision of the Trans-European Networks will face significant challenges, as it requires unanimous agreement from all member states to pass. Greece, Italy, Romania, and Bulgaria are strongly opposed to the modification of the TED, but if this measure is tied to the next EU budget proposal, it could potentially change the political landscape.

A source familiar with tobacco policy informed Euractiv:

"This is a way to compel member states to raise tobacco taxes without modifying TED."

Hoekstra's office has not yet responded to Euractiv's request regarding whether the committee proposal includes a tobacco tax.