CELEX: 62013CJ0428
Reference for a preliminary ruling
Tax provisions
Harmonisation of laws
Directives 95/59/EC and 2011/64/EU
Structure and rates of excise duty applied to manufactured tobacco
Establishment of an excise duty
Principle establishing one rate of excise duty for all cigarettes
Possibility for the Member States of establishing a minimum amount of excise duty
Cigarettes in the lowest price category
National legislation
Specific category of cigarettes
Excise duty set at 115%

This request for a preliminary ruling concerns the interpretation of Articles 7(2) and 8(6) of Council Directive 2011/64/EU of 21 June 2011 on the structure and rates of excise duty applied to manufactured tobacco (
OJ 2011 L 176, p. 24
).
The request has been made in proceedings between, on the one hand, the Ministero dell’Economia e delle Finanze (Ministry of Economic Affairs and Finance) and the Amministrazione Autonoma dei Monopoli di Stato (AAMS) (Independent Authority for the Administration of State Monopolies) and, on the other, Yesmoke Tobacco SpA concerning a decision of the Director-General of the AAMS entitled ‘Ripartizione dei Prezzi delle sigarette — Tabella A’ (Break-down of cigarette prices — Table A), of 11 January 2012 (GURI No 16 of 20 January 2012) (‘the contested decision’), introducing a minimum excise duty only for cigarettes with a retail selling price lower than that of cigarettes in the most popular price category.
Legal context
EU law
Directive 95/59
Article 8(2) of Council Directive 95/59/EC of 27 November 1995 on taxes other than turnover taxes which affect the consumption of manufactured tobacco (
OJ 1995 L 291, p. 40
), as amended by Council Directive 2010/12/EU of 16 February 2010 (
OJ 2010 L 50, p. 1
) (‘Directive 95/59’), provides:
‘The rate of the proportional excise duty and the amount of the specific excise duty must be the same for all cigarettes.’
Article 16(7) of Directive 95/59 states:
‘Subject to paragraphs 3, 4, 5 and 6, Member States may levy a minimum excise duty on cigarettes.’
Directive 2011/64
Recitals 2, 3, 9, 14 and 16 in the preamble to Directive 2011/64 state:
‘(2)
The Union’s fiscal legislation on tobacco products needs to ensure the proper functioning of the internal market and, at the same time, a high level of health protection, as required by Article 168 of the Treaty on the Functioning of the European Union, bearing in mind that tobacco products can cause serious harm to health and that the Union is Party to the World Health Organization’s Framework Convention on Tobacco Control (FCTC). Account should be taken of the situation prevailing for each of the various types of manufactured tobacco.
(3)
One of the objectives of the Treaty on European Union is to maintain an economic union, whose characteristics are similar to those of a domestic market, within which there is healthy competition. As regards manufactured tobacco, achievement of this aim presupposes that the application in the Member States of taxes affecting the consumption of products in this sector does not distort conditions of competition and does not impede their free movement within the Union.
…
(9)
As far as excise duties are concerned, harmonisation of structures must, in particular, result in competition in the different categories of manufactured tobacco belonging to the same group not being distorted by the effects of the charging of the tax and, consequently, in the opening of the national markets of the Member States.
…
(14)
As regards cigarettes, neutral conditions of competition for manufacturers should be assured, the partitioning of the tobacco markets should be reduced and health objectives should be underscored. Thus, a price related minimum requirement should refer to the weighted average retail selling price, whereas a monetary minimum should be applicable to all cigarettes. For the same reasons, the weighted average retail selling price should also serve as a reference for measuring the importance of specific excise duty within the total tax burden.
…
(16)
Such convergence would also help to ensure a high level of protection for human health. The level of taxation is a major factor in the price of tobacco products, which in turn influences consumers’ smoking habits. Fraud and smuggling undermine tax induced price levels, in particular of cigarettes and fine-cut tobacco intended for the rolling of cigarettes, and thus jeopardise the achievement of tobacco control and health protection objectives.’
Article 1 of Directive 2011/64 provides:
‘This Directive lays down general principles for the harmonisation of the structure and rates of the excise duty to which the Member States subject manufactured tobacco.’
Paragraphs 1 and 2 of Article 7 of Directive 2011/64 are worded as follows:
‘1.   Cigarettes manufactured in the Union and those imported from third countries shall be subject to an ad valorem excise duty calculated on the maximum retail selling price, including customs duties, and also to a specific excise duty calculated per unit of the product.
Notwithstanding the first subparagraph, Member States may exclude customs duties from the basis for calculating the ad valorem excise duty on cigarettes.
2.   The rate of the ad valorem excise duty and the amount of the specific excise duty must be the same for all cigarettes.’
Under Article 8(3) to (6) of Directive 2011/64:
‘3.   Until 31 December 2013, the specific component of the excise duty shall not be less than 5% and shall not be more than 76.5% of the amount of the total tax burden resulting from the aggregation of the following:
(a)
specific excise duty;
(b)
the ad valorem excise duty and the value added tax (VAT) levied on the weighted average retail selling price.
4.   From 1 January 2014, the specific component of the excise duty on cigarettes shall not be less than 7.5% and shall not be more than 76.5% of the amount of the total tax burden resulting from the aggregation of the following:
(a)
specific excise duty;
(b)
the ad valorem excise duty and the VAT levied on the weighted average retail selling price.
5.   By way of derogation from paragraphs 3 and 4, where a change in the weighted average retail selling price of cigarettes occurs in a Member State, thereby bringing the specific component of the excise duty, expressed as a percentage of the total tax burden, below the percentage of 5% or 7.5%, whichever is applicable, or above the percentage of 76.5% of the total tax burden, the Member State concerned may refrain from adjusting the amount of the specific excise duty until 1 January of the second year following that in which the change occurs.
6.   Subject to paragraphs 3, 4 and 5 of this Article and the second subparagraph of Article 7(1), Member States may levy a minimum excise duty on cigarettes.’
Article 14(2) of Directive 2011/64 provides:
‘The overall excise duty (specific duty and/or ad valorem duty excluding VAT), expressed as a percentage, as an amount per kilogram or for a given number of items, shall be at least equivalent to the rates or minimum amounts laid down for:
(a)
cigars or cigarillos: 5% of the retail selling price inclusive of all taxes or EUR 12 per 1000 items or per kilogram;
(b)
fine-cut smoking tobacco intended for the rolling of cigarettes: 40% of the weighted average retail selling price of fine-cut smoking tobacco intended for the rolling of cigarettes released for consumption, or EUR 40 per kilogram;
(c)
other smoking tobaccos: 20% of the retail selling price inclusive of all taxes, or EUR 22 per kilogram.
From 1 January 2013, the overall excise duty on fine-cut smoking tobacco intended for the rolling of cigarettes shall represent at least 43% of the weighted average retail selling price of fine-cut smoking tobacco intended for the rolling of cigarettes released for consumption, or at least EUR 47 per kilogram.
From 1 January 2015, the overall excise duty on fine-cut smoking tobacco intended for the rolling of cigarettes shall represent at least 46% of the weighted average retail selling price of fine-cut smoking tobacco intended for the rolling of cigarettes released for consumption, or at least EUR 54 per kilogram.
From 1 January 2018, the overall excise duty on fine-cut smoking tobacco intended for the rolling of cigarettes shall represent at least 48% of the weighted average retail selling price of fine-cut smoking tobacco intended for the rolling of cigarettes released for consumption, or at least EUR 60 per kilogram.
From 1 January 2020, the overall excise duty on fine-cut smoking tobacco intended for the rolling of cigarettes shall represent at least 50% of the weighted average retail selling price of fine-cut smoking tobacco intended for the rolling of cigarettes released for consumption, or at least EUR 60 per kilogram.
The weighted average retail selling price shall be calculated by reference to the total value of fine-cut smoking tobacco intended for the rolling of cigarettes released for consumption, based on retail selling price including all taxes, divided by the total quantity of fine-cut smoking tobacco intended for the rolling of cigarettes released for consumption. It shall be determined by 1 March at the latest of each year on the basis of data relating to all such releases for consumption made in the preceding calendar year.’
Article 21 of Directive 2011/64 provides:
‘Directives 92/79/EEC, 92/80/EEC and 95/59 …, as amended by the Directives listed in Annex I, Part A, are repealed, without prejudice to the obligations of the Member States relating to the time-limits for transposition into national law and application of the Directives set out in Annex I, Part B.
References to the repealed Directives shall be construed as references to this Directive and shall be read in accordance with the correlation table set out in Annex II.’
Article 22 of Directive 2011/64 provides that that directive is to enter into force on 1 January 2011.
Italian law
In Legislative Decree No 504 of 26 October 1995 (Ordinary Supplement to GURI No 279 of 29 November 1995), decree amended by Article 55(2a)(c) of Law No 122 of 30 July 2010 (Ordinary Supplement to GURI No 176 of 30 July 2010) (‘the Legislative Decree’), Article 39d, entitled ‘Retail selling price break-down tables’, provides:
‘1.   The break-down tables for manufactured tobacco retail selling prices shall be established by an act of the Director of the Independent Authority for the Administration of State Monopolies, to be published in the Official Journal of the Italian Republic. The selling prices of the products referred to in Article 39a(1)(a) and (b) shall be established by reference to the conventional kilogram, which corresponds, respectively, to:
(a)
200 cigars;
(b)
400 cigarillos;
(c)
1000 cigarettes.
2.   For cigarettes, the tables referred to in paragraph 1 shall be established by reference to cigarettes in the most popular price category, to be determined every three months on the basis of the data collected on the first day of each quarter of the calendar year and, as regards the calculation of the specific component of the excise duty, on the basis of the weighted average retail selling price of the cigarettes referred to in paragraph 2a.
2a.   Before 1 March of each calendar year, the [AAMS] shall determine, for the cigarettes referred to in Article 39a(1)(b), the weighted average retail selling price per conventional kilogram … which shall be equal to the ratio, expressed in euro to the nearest decimal point, between the total value, calculated by reference to the retail selling price, inclusive of all taxes, of the cigarettes released for consumption in the previous calendar year and the total quantity of those cigarettes.’
Paragraphs 3 and 4 of Article 39g of the Legislative Decree, which is entitled ‘Basic rate and calculation of the excise duty applied to manufactured tobacco’, state:
‘3.   For cigarettes in the most popular price category, determined in accordance with Article 39d(2), the excise duty shall be calculated by applying the appropriate basic rate to the retail selling price. That amount shall constitute the basic amount.
4.   The excise duty payable on cigarettes with a retail selling price lower than that of cigarettes in the most popular price category referred to in Article 39d(2) shall be 115% of the basic amount referred to in paragraph 3.’
The dispute in the main proceedings and the question referred for a preliminary ruling
By the contested decision, the Director-General of the AAMS, acting pursuant to Article 39g(4) of the Legislative Decree, set at 115% of the basic rate the minimum excise duty payable on cigarettes with a retail selling price lower than that of cigarettes in the most popular price category.
Yesmoke Tobacco SpA, a company that produces and markets cigarettes at a lower price than that of the most popular price category, challenged the contested decision before the Tribunale amministrativo regionale per il Lazio (Lazio Regional Administrative Court), claiming that that measure was equivalent, in its effects, to the establishment of a minimum selling price for cigarettes.
By judgment of 5 April 2012, the Tribunale amministrativo regionale per il Lazio annulled the contested decision after declining to apply Article 39g of the Legislative Decree. That court held that the decision had effectively reintroduced a minimum resale price for manufactured tobacco, which was contrary, in its view, to the judgment in
Commission
v
Italy
(C‑571/08,
EU:C:2010:367
).
The Ministero dell’Economia e delle Finanze and the AAMS lodged an appeal against that judgment before the Consiglio di Stato (Council of State; or ‘the referring court’) on 5 June 2012. The appellants claim that the national legislation on the minimum selling price for cigarettes on which the Tribunale amministrativo regionale per il Lazio ruled has no connection with the provisions laid down in Article 39g. On the contrary, that legislation is entirely consistent with EU law, since Directive 2011/64 permits Member States to levy a minimum excise duty on cigarettes.
The referring court considers that the outcome of the dispute in the main proceedings turns on the interpretation of Directives 95/59 and 2011/64.
In those circumstances, the Consiglio di Stato decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling:
‘Do Article 8(2) of Directive 95/59 … and Article 7(2) of Directive 2011/64 …, by providing, respectively, that the proportional rate and ad valorem rate, and the amount of the specific excise duty … must be the same for all cigarettes, preclude a provision of national law such as Article 39g(4) of the Legislative Decree …, which provides that the excise duty payable on cigarettes with a retail selling price lower than that of cigarettes in the most popular price category is to be 115% of the basic amount, thereby establishing an excise duty at a fixed minimum rate specific to cigarettes with a lower selling price and not a minimum amount of excise duty for all price categories of cigarettes, as permitted by Article 16(7) of Directive 95/59 … and Article 14(2) of Directive 2011/64 …?’
Consideration of the question referred
As a preliminary point, it should be observed, first, that the dispute in the main proceedings concerns a decision of the Director-General of the AAMS setting the rates of excise duty on cigarettes, which was taken on 11 January 2012. In accordance with Articles 21 and 22 of Directive 2011/64, Directive 2011/64 replaced Directive 95/59 with effect from 1 January 2011. The question referred must therefore be examined solely in relation to the provisions of Directive 2011/64.
Secondly, it should be noted that the referring court refers to Article 14(2) of Directive 2011/64, which is to be found in Chapter 4 of that directive, entitled ‘Provisions applicable to manufactured tobacco other than cigarettes’, which does not concern cigarettes. The system of minimum excise duty that is the subject of the question referred is provided for in Article 8(6) of Directive 2011/64. Accordingly, the question referred must be understood as relating to Article 8(6) of that directive and not to Article 14(2) thereof.
It follows from the foregoing that, by its question, the referring court asks, in essence, whether Articles 7(2) and 8(6) of Directive 2011/64 must be interpreted as precluding a provision of national law which, rather than establishing a minimum excise duty that is identical for all cigarettes, establishes a minimum excise duty that is applicable only to cigarettes with a retail selling price lower than that of cigarettes in the most popular price category.
The purpose of Directive 2011/64 is to lay down general principles for the harmonisation of the structure and rates of the excise duty which the Member States levy on manufactured tobacco. It is apparent – inter alia, from recitals 2, 3, 9 and 14 to Directive 2011/64 – that the objective of that directive is to ensure the proper functioning of the internal market and neutral conditions of competition. In particular, harmonisation of the structure of excise duty is not to have the effect of distorting competition in the tobacco sector.
So far as cigarettes are concerned, Article 7(1) of Directive 2011/64 provides that an overall excise duty made up of an ad valorem excise duty, calculated on the maximum retail selling price, and a specific excise duty, calculated per unit of the product, is to be payable on cigarettes manufactured in the European Union and those imported from non-member countries. The amount levied by way of the overall excise duty varies according to the selling price of the cigarettes since the ad valorem excise duty is set on the basis of the selling price, and the lower the selling price, the lower the ad valorem excise duty, and vice-versa.
Article 7(2) of Directive 2011/64 specifies that the rate of the ad valorem excise duty and the amount of the specific excise duty must be the same for all cigarettes. It is apparent from the very wording of Article 7(1) and (2) that it is mandatory for the overall excise duty to be levied in respect of all cigarettes, whatever their characteristics or price.
However, under Article 8(6) of Directive 2011/64, Member States may levy a minimum excise duty on cigarettes, subject, inter alia, to paragraphs 3, 4 and 5 of Article 8, which lay down the bands that must be respected when the specific excise duty is established.
In this connection, it should be observed that the qualifier ‘minimum’ means that the excise duty provided for in Article 8(6) of Directive 2011/64 represents a minimum tax threshold, below which there may not be a proportional reduction in the tax payable. As the European Commission stated in its written observations submitted to the Court, the minimum excise duty serves to ensure that the ad valorem excise duty does not have a proportional effect below the minimum tax threshold.
In the light of the fact that it is mandatory for the overall excise duty to be levied in respect of all cigarettes whatever their characteristics or price, a minimum excise duty, established by Member States on the basis of Article 8(6) of Directive 2011/64, must be applied to all cigarettes, irrespective of their characteristics or price (see, to that effect, as regards Directive 95/59, judgment in
Commission
v
France
, C‑302/00,
EU:C:2002:123
, paragraph 20).
Moreover, it should be noted that Directive 2011/64 makes a distinction between the different categories of manufactured tobacco that are the subject of the harmonisation it seeks to achieve – namely, cigarettes, cigars and cigarillos, fine-cut tobacco and other smoking tobacco – without, however, making a distinction between different categories of cigarettes. Accordingly, cigarettes must be regarded as a single category of manufactured tobacco for the purposes of Directive 2011/64.
The establishment of a minimum excise duty only for certain categories of cigarettes, as provided for in the national legislation at issue in the main proceedings, would permit, in respect of certain other categories of cigarettes, an amount to be levied by way of the overall excise duty that would be less than the minimum excise duty, even though the introduction of that minimum excise duty ought, pursuant to Directive 2011/64, to be designed to prevent, in a low price context, the possibility of there being, below that threshold, a proportional reduction of the tax payable and accordingly, to prevent the level of taxation of the cheapest cigarettes from being too low.
If Member States make use of the power to establish a minimum excise duty pursuant to Article 8(6) of Directive 2011/64, the ensuing legislation must come within the framework laid down by that directive and cannot run counter to the objectives of that directive. The establishment of different minimum tax thresholds according to the characteristics or price of cigarettes would lead to distortions of competition as between different cigarettes and would therefore be contrary to the objective pursued by Directive 2011/64 of ensuring the proper functioning of the internal market and neutral conditions of competition.
That is precisely the effect of the legislation at issue in the main proceedings, which provides for excise duty, set at 115% of the excise duty applicable to the most popular price category, to be applied solely in respect of cigarettes with a selling price lower than that of cigarettes in the most popular price category.
In the case before the referring court, the contested decision indicates, as can be seen from the table annexed to that decision, that the cigarettes in the most popular price category are cigarettes with a retail selling price of EUR 210 per thousand cigarettes and on which an amount of excise duty – called ‘the basic amount’ – of EUR 122.85 per thousand cigarettes is levied by way of the overall excise duty. Under Article 39g of the Legislative Decree, cigarettes with a price lower than that of the most popular category of cigarettes, that is, less than EUR 210 per thousand cigarettes, are subject to excise duty of 115% of the basic amount, which represents 115% x EUR 122.85, that is to say, EUR 141.28 per thousand cigarettes. Accordingly, under the Italian legislation, cigarettes with a retail selling price of less than EUR 210 per thousand cigarettes are subject to an amount of excise duty that is greater than the amount of excise duty levied, in terms of the overall excise duty, on cigarettes with a retail selling price of between EUR 210 and EUR 243 per thousand cigarettes.
The Italian legislation therefore establishes a system in which the amount levied on cigarettes in the most popular price category, in terms of the overall excise duty, is lower than the amount levied by way of the minimum excise duty on the cheapest cigarettes, a situation which leads to the distortion of competition and runs counter to the objectives of Directive 2011/64.
As regards the public health objective relied upon by the Italian, Spanish, French and Portuguese Governments in their respective written observations submitted before the Court, it should be stated that Directive 2011/64 takes into account, in accordance with recitals 2, 14 and 16 thereto, the objective of the protection of public health. In particular, recital 16 to that directive states that the level of taxation is a major factor in the price of tobacco products, which in turn influences consumers’ smoking habits. In this connection, the Court has already held that fiscal legislation is an important and effective instrument for discouraging consumption of tobacco products and, therefore, for the protection of public health (see, to that effect, as regards Directive 95/59, judgment in
Commission
v
Italy
,
EU:C:2010:367
, paragraph 51).
Provided that the national measures come within the framework laid down by Directive 2011/64, that directive does not prevent the Member States from taking measures to combat smoking and to ensure a high level of protection for public health by levying excise duties (see, to that effect, as regards Directive 95/59, judgment in
Commission
v
Italy
,
EU:C:2010:367
, paragraph 48).
In the light of all the foregoing considerations, the answer to the question referred is that Articles 7(2) and 8(6) of Directive 2011/64 must be interpreted as precluding a provision of national law, such as that at issue in the main proceedings, which, rather than establishing an identical minimum excise duty that is applicable to all cigarettes, establishes a minimum excise duty that is applicable only to cigarettes with a retail selling price lower than that of cigarettes in the most popular price category.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

On those grounds, the Court (Fifth Chamber) hereby rules:

Articles 7(2) and 8(6) of Council Directive 2011/64/EU of 21 June 2011 on the structure and rates of excise duty applied to manufactured tobacco must be interpreted as precluding a provision of national law, such as that at issue in the main proceedings, which, rather than establishing an identical minimum excise duty that is applicable to all cigarettes, establishes a minimum excise duty that is applicable only to cigarettes with a retail selling price lower than that of cigarettes in the most popular price category.

[Signatures]
(
*1
)	Language of the case: Italian.