Tuesday

18th Feb 2020

E-cigarette tax sets scene for EU lobbying war

  • Global e-cigarette market forecast to grow to €46 billion by 2025 or 2030 (Photo: Vaping360)

EU countries are preparing to tax e-cigarettes under the same regime as normal cigarettes, in a move likely to increase prices and to prompt a fight by lobbyists in Brussels.

Last Friday (26 February), member states’ ambassadors agreed to take the first step by asking the European Commission to draft an “appropriate legislative proposal” in 2017.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or join as a group

  • UK treasury, for one, pockets €15.5 billion a year from tobacco excise tax (Photo: Daniel de André)

The project is to be endorsed without further discussion when the bloc’s finance ministers meet on 8 March.

The ministers’ draft conclusions said that e-cigarettes, as well as other “novel” products, could cause “inconsistencies and legal uncertainty” in the single market if they stayed exempt from excise tax.

They also said excise duties or some “other specifically designed tax” on novel tobacco items, which use steam instead of smoke to put nicotine into people’s lungs, could help meet “public health objectives”.

They added that work on the new tax regime should be “intensified” if “the market share of such products show a tendency to increase”.

Prices 'will rise'

Global e-cigarette sales were about €7.5 billion last year. But analysts forecast they will grow to €46 billion by 2025 or 2030.

Under existing rules, all EU countries must impose an excise tax of at least 57 percent on tobacco products, but most impose only VAT on e-cigarettes at a level of about 20 percent.

In the UK the excise and VAT burden sees the state collect £6.17 every time someone pays the recommended retail price of £7.98 for a pack of 20 premium-brand cigarettes.

The excise income alone is worth €15.5 billion a year.

One EU official said on Monday (29 February) it was “self-evident” that the price of e-cigarettes would go up if the commission went ahead. A second official said it was “too early to say what effect the review” of excise rules might have on prices.

The ministers' draft conclusions noted that the commission was not obliged to go ahead. But the draft text said EU states would want “reasons” if it did not act.

With several EU capitals still struggling to balance the books, the commission in a report in December also said e-cigarette taxes could have “significant long term budgetary implications” for national treasuries.

Lobbying war

One of the EU officials said the next steps would be “to undertake studies, carry out impact assessments, [and] a public consultation”, setting the stage for a new lobbying war in Brussels.

The last time the EU regulated e-cigarettes, in 2014, big tobacco firms led by Philip Morris International (PMI) tried to dilute the new restrictions on grounds that e-cigarettes help people to quit smoking.

They did it because they were buying up e-cigarette makers to protect their profits.

E-cigarette firms joined them in what Olivier Hoedeman, from Corporate Europe Observatory (CEO), a Brussels-based pro-transparency NGO, called an “angry” campaign with “very strong emotions”.

One MEP at the time got an email saying she would be “finished” if she obstructed e-cigarettes.

EUobserver received emails saying it would be responsible for smokers’ deaths if it published stories giving credence to claims that e-cigarettes are bad for your health.

On the other side, pharmaceutical giants such as GlaxoSmithKline lobbied for tougher EU rules on the grounds that e-cigarettes encouraged young people to start smoking.

They did it because they make nicotine gums and patches, which compete with e-cigarettes for people trying to give up. But gums and patches are regulated under more exacting EU medical product standards.

They were joined by companies such as Trierenberg-Gruppe, the world’s top producer of cigarette papers.

More research needed

Public health advocates such as Cancer Research UK and the European Heart Network are concerned that the corporate lobbyists are ignoring science.

Most health NGOs do not have a position on e-cigarettes because they are too new for conclusive research on long-term benefits and risks.

The European Network for Smoking and Tobacco Prevention, a Brussels-based group, is calling for tougher EU rules.

But its spokesman, Dominick Nguyen, told EUobserver: “This is not about being for or against e-cigarettes, but [about] encouraging research and provision of evidence on e-cigarettes in order to make the right informed decisions.”

Commenting on the “public health” aspect of the excise tax project, CEO’s Hoedeman said: “It would be quite awkward to put e-cigarettes in the same category [as normal cigarettes] if the science isn’t there yet”.

PMI was not available for comment on Monday. GlaxoSmithKline declined to comment.

According to their public declarations, PMI spent up to €1.5 million lobbying EU officials in 2014. GlaxoSmithKline spent up to €2 million.

MEPs split on tobacco deal with PMI

With less than five months until a deal with tobacco company PMI expires, MEPs and commissioner Georgieva discussed how to fight illegal cigarette trade after its expiration date.

MEP defends confidentiality of tobacco meeting

Discussion on the value of EU deals with top tobacco firms had to be held behind closed doors, said the German MEP who organised it: “Some people didn't want to be quoted”.

Opinion

Are MEPs too 'free' to be accountable?

The European Parliament is currently fine-tuning its negotiating position on the Commission's proposal from September 2016 for a mandatory transparency register. Sadly, so far it seems to prefer empty statements to bold action.

Analysis

EU plan on AI: new rules, better taxes

The bloc wants to become a global leader in innovation in the data economy and AI. However, proportional legislation, better data-availability and huge invesment will be needed across the EU to compete with China and the US.

MEPs urge binding rules for common chargers by July

MEPs demanded the European Commission ensure immediate EU regulatory action on common chargers for all mobile devices by July, enabling users to easily re-use old devices and reducing e-waste.

Online platforms need regulating, Jourova warns

The EU commission vice-president pledged to tackle disinformation by regulating platforms and cleaning up online political advertising rules. She also pointed to Russia and China as wanting to undermine European democracy.

Stakeholders' Highlights

  1. Nordic Council of MinistersScottish parliament seeks closer collaboration with the Nordic Council
  2. UNESDAFrom Linear to Circular – check out UNESDA's new blog
  3. Nordic Council of Ministers40 years of experience have proven its point: Sustainable financing actually works
  4. Nordic Council of MinistersNordic and Baltic ministers paving the way for 5G in the region
  5. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms
  6. Nordic Council of MinistersNordic Climate Action Weeks in December

Latest News

  1. Ending shell companies does not threaten privacy
  2. Net payer countries push back on EU budget plans
  3. Is Belgium heading for new elections?
  4. Budget, Zuckerberg, Pelosi and Cayman Islands This WEEK
  5. EU plan on AI: new rules, better taxes
  6. What the EU can do for South Sudan - right now
  7. The last best chance for Donbas and peace in Europe?
  8. EU commissioner lobbied by energy firm he owns shares in

Join EUobserver

Support quality EU news

Join us