Proposal for EU E-Cigarette Tax as Part of Tobacco Amendments
A draft document from the EU Commission indicates that the EU is considering proposing a tax on electronic cigarettes as part of a tobacco tax amendment, which would also double the consumption tax in low-tax member countries.
As of now, the tax situation within the European Union has been fragmented due to different member states imposing different tax rates on different products. While e-cigarette products are regulated under the Tobacco Products Directive (TPD) for their health aspects, there still isn't a pan-European tax framework established for them. In 2017, the European Commission (EC) called for negotiations on the proposed revisions to the Tobacco Excise Directive (TED), which will include such taxes.
In February 2020, a report from the European Union indicated that the development of new electronic cigarettes, heated tobacco products, and modern products containing nicotine or cannabis is accelerating within the internal market. The report noted that the current tax and regulatory frameworks for these products lack coordination, which limits the ability to monitor their market growth and control their movement.
As a result, the proposed tax amendment will increase the European Union's minimum consumption tax on cigarettes from €1.80 per pack to €3.60 per pack, raising prices in Eastern European countries where cigarettes cost less than €3. For example, Hungary has been gradually increasing its local tobacco tax, making these products unaffordable for most locals. This comes after the European Commission was brought before the European Court in 2019 for failing to apply minimum excise duties on cigarettes.
Furthermore, the European Union's 2011 Tobacco Tax Directive update will impose taxes on innovative nicotine products such as electronic cigarettes and heated tobacco. One key feature of this tax is that more powerful electronic cigarette products will be subject to a tax of at least 40%, while lower powered products will face a fee of 20%. Heated tobacco products will also be impacted with a tax rate of 55%, collecting €91 in taxes for every 1000 goods sold.
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