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DELACOMMISSION
COLLECTION RELIEEDES
DOCUMENTS "COM"
COM(76)22
Vol.1976/0012

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COMMISSION OPTHEEURQPEAN
COM(76)22final .
Brussels ,kFebruary 1976
PROPOSAL FOR ACOUNCIL DIRECTIVE
amending Directive N°.72/464/EEC,asamenden by
Directives N°s,74/318/EECof25june 1975 »and
75/«»»/EECof18December 1975 ontaxes other
than turnover taxes which affect the consumption
ofmanufactured tobacco
(submitted totheCouncil BYtheCommission )
COM (76)22final .

EXPLANATORY MMORAEDUM
I.Introduction
InaccordancewiththeCouncilDirectiveof19December1972,as
amendedbytheCouncilDirectivesof25June1974^^and13December,1975^^
thefirststageofharmonization ofthestructuresoftheexcisedutyon
manufactured tobaccocoversatpresentaperiodof48monthsfrom
1July1973to30June1977*Thisfirststageconcernstheexciseduty
oncigarettesonly.Apartfroncertaingeneralprovisionsontheprinciples
ofharmonization ,theDirectives donotcontainanyspecificprovisions
concerningothermanufactured tobaccos.
Article1(3)and(4)oftheaboveDirectiveprovidesthattheCouncil,
actingonaproposalfromtheCommission ,mustadoptaDirectiveatleast
oneyearbeforetheexpiryofthefirststage,i.e.,before1July1976j
layingdownthespecialcriteriaapplicableduringthefollowingstage
orstages.
Thisproposalforadirectiveconcernstheprovisionsapplicableduring
thesecondstageofharmonization ofthestructureoftheexciseduties
oncigarettes.Itdoesnotconcernmanufactured tobaccootherthan
cigarettes.
II.Background
A*»A •^«1A•1 1qn >1 m,♦On21April1970»theCounciladoptedaResolution 'concerningtaxes
otherthanturnovertaxeswhichaffecttheconsumption ofmanufactured
tobacco.Atthattine,twoexcisesystemsforthetaxationofcigarettes
'-^OJ¥0.L303,31Decernber1972
(2^0Jlio.L180,3July1974
^OJNo.
Ho.C50/1,28April1970.
/■

existedintheCommunityoftheSix.InGermany,aspecificexcisewas
leviedasafixedamountpercigarette;inthefiveotherMemberStates,
theexcisewasleviedasapercentageofthetax-inclusiveretailprice.
TheCouncilResolutionof21April1970providedthatboththesesystems
shouldbecombinedina.harmonizedsystemconsistinginpartofa
proportional componentand.inpartofaspecificcomponent.TheCouncil
Resolutiondidnotfixtherelationship bettireenthetwocomponents ,but
providedthatatthefinalstageofharmonization ,beginning1January19*30,
the.relationship shouldbosuchthattherangeofretailpriceswould
reflectfairlythodifferenceinthemanufacturers' deliver;.'prices.
TheseprovisionsoftheResolutionwereembodiedintheCouncilDirective
of19.12.1972^^.TheDirectivealsoestablishedthatafirststageof
harmonization wouldrunfor.twoyearsfrom1.7.1973.Durin^thir,stage,
andwithoutprejudicetotheratiofinallytobeadopted,thespecific
•»»
componentoftheexcisetobeleviedoncigarettes wasfixedatnotless
than5fcctfidnetmorethan75/'°oftheaggregateanountoftheadvalorem
andspecificcomponents.
TheCouncilDirectivewasofcourseadoptedpriortotheenlargement of
theCommunity.Hovjever,duringdiscussions onthoDirective,twoofthe
newMemberStates,IrelandandtheUnitedKingdom,pointedoutthattheir
excisesystemfortaxingcigarettes ,whichwasleviedontheweightof
therawtobacco,differedfrombothofthesystemsappliedintheoriginal
sixMemberStates.Theyrepresentedthatthedirectivewouldradically
altertheirmarketsforcigarettesandthataperiodofderogationwould
beessential.Boththesecountrieswerethereforeaccordedaderogation
fromtheDirectiveuntiltheendof1977*ThussevenofthenineMember
StatesImplementedthefirststageofharmonization by1July1973«
^'QJNo.L303,31December1972.

Discussions held during 1973 jwith aview toasecond movement towards
alignment ofthese different taxsystems ,proved abortive .Inaddition ,
the Commission itself felt that the accentuation ofthe different market
conditions resulting from theenlargement oftheCommunity required
further examination before concrete proposals forasecond stage could be
putforward .TheCommission therefore proposed ,inMarch 1974 »atwelve­
month prolongation ofthefirst stage ,to30June 1976 »inorder toprovide
more time forthesearch foraSatisfactory solution .Aprolongation had
theadditional advantage ofpermitting theeffects ofthefirst ,,stage to
beassessed before further proposals were putforward .TheCouncil
adopted thetwelve-month prolongation in.itsDirective of25June1974^"^.
TheCommission also submitted inIlarch 1974 adraft second Directive on
2harmonization oftobacco excises ,which specifies thegroups ofproducts
into which manufactured tobacco istobedivided within the harmonized
systom ,anddefines thecharacteristics ofeach product group .The
Economic and Social Committee andtheEuropean Parliament gave their ,
opinions ontheproposals inJulyandNovember 1974respectively ^^.
TheCommission attaches some importance totheprompt adoption ofthis
Directive ,since itismanifest that progress inharmonizing other aspects
ofthetaxstructure should bematched bytheadoption ofuniform product
groups anddefinitions .Ifthis isnotthecase ,inconsistencies inthe
coverage ofthetobacco taxes mayemerge asharmonization progresses .
TheCommission also notes that both theEuropean Parliament andthe
Economic andSocial Committee recent lj^deplored theCouncil *sfailure
4)toadopt theSecond Directive ^-,andurged theCouncil todosowithout
delay .
'^OJ No.L180,3July1974
(2WNo.C72,27June1974
(-^OJ.No .C125,16October 1974 (ECS)0Jlío.155,9December 1974 (EP)
v''CJ (Resolutions onsecond prolongation ).
0JNo.C.239 ,20October 1975 .

-4-
Latein1974,theCommissionauthorised ,astudybyconsultantsintothe
likelyeffectsondemandforcigarettesof"blackandblondtobaccossold
onCommunitymarketsinresponsetochangesinthesystemoftaxing
manufactured tobaccos.Thestudyexaminedthreealternative excise
structuresforcigarettes :astructurewithahighspecificcomponent;
astructurewithahighadvaloremcomponent;andastructurecombining
substantial advaloremandspecificcomponents.Theconsultants received
ahighlevelofco-operation and.muchdatafromtobaccoproducers
throughouttheCommunity.Theyalsodiscussedtheirestimatesofthe
probableeffectsofeachofthethreealternatives withthemajor
cigaretteproducers.
Thereportonthestudyconcluded,interalia,thatovertheCommunityas
awhole,harmonization onapredominantly advaloremstructureseemed
likelytoproducelessdisturbance intheshorttermtoexistingmarket
patternsthanwouldeitheroftheothertwoalternatives examined.
However,itwasalsoconcludedthattherearegroundsfortheviewthata
structurecombiningatthefinalstagesubstantial elementsofbothad
valoremand.specifictaxationwouldincreasethepossibility ofincreased
inter-penetration ofmarkets.Thepreciseratioofspecifictoadvalorem
taxationwhichwouldcreatebalancedopportunities forsuchinter­
penetration wouldrequirefurtherstudy.Thereportalsoreferredto
concernexpressedbyprivatesectorproducersatthepressureonprofit
marginsandproductqualityofapredominantly advaloremstructure,and
concludedthatfurtherstudywasnecessaryinordertoevaluatesuch
problems.,
Theseconclusions areofcoursetheresponsibility oftheauthorsofthe
study,andinnowaycommittheCommission,Nevertheless ,theCommission
considersthatthestudycontributesusefullytodiscussionoftobacco
exciseharmonization ,andhastakenitsfindingsinto^accountinthe
preparation ofthepresentproposals.Thestudywillbepublishedas
soonaspossible.
/.

-5-
III .The general lines ofthe proposal
Broadly ,thechoice forfuture proposals appears tolie "between the
alternatives ofcontinued prolongation ofthefirst stage pending
agreement onthe .final structure ,slow progression viaalarge number
ofmodest stages ,ormoving assoon aspossible (i.e. ,from 1July 1977 )
toasecond stage requiring substantial increases intheminima for
both the advalorem and specific components .The first course has so
farproved fruitless# Thesecond would prolong theexcise harmonization
process far into thefuture ,,Such aprocess would expose producers in
particular tocontinuing uncertainty both astothefinal outcome andas
toeach succeeding stage ,andwould inevitably inhibit product and
investment planning over alengthy period .Moreover ,successive small
steps would provide only agradual stimulus towards market inter­
penetration .Thethird course seems likely toprovide animmediate
stimulus tomarket interpenetration .Ey-reducing substantially the
spread between thepermitted minimum andmaximum percentages forboth
thespecific andadvalorem components ,itwould appreciably narrow the
gaptobebridged atthefinal stage ,butwould leave amargin for
manoeuvre atthefinal stage ,tobeused inthelight ofexperience during
thesecond stage .%comparison with thesecond alternative ,itwould
greatly reduce both thedegree andtheperiod ofuncertainty for
producers .TheCommission proposals aretherefore based onthethird
choice above .
TV.The absence ofproposals for the final stance .
TheEuropean Parliament ,initsopinion ontheproposal forasecond
prolongation ofthefirst stage ,urged theCommission tosubmit proposals
forasecond andsubsequent stages assoon aspossible .TheCommission
understands ,andindeed shares ,theconcern toreduce uncertainty over
future harmonization toaminimum .This isclearly desirable .Reference
hasalready been made totheinhibiting effects onlong-term planning of
continuing -uncertainty over 'the future path ofexcise harmonisat'ion.The
question ofv/hether ornotthepresent proposal should ,inaddition tothe
second stage provisions ,include provisions forthefinal stage ,has
therefore been carefully considered .
./•

-β-
Unfortunately ,discussionstodatehavemerelydemonstrated thepersistent
divergenceofviewpoints ontherelationship toapplyatthefinalstage
"betweenthespecificandadvaloremelements -"inahairoenizedrexcise,'
Littleornochangehas"beenremarkedinthedifferine;viewpointsduring
discussions overthelasttwoyears.Thelikelihoodofagreementona
proposalforthefinalstageisthereforeslimatthepresenttime.
Moreover,tosubmitsuchaproposalnowwouldruncountertotheconcept
ofprogressiveharmonization .Ifsuchaproposalwereadopted,itwould
committheCommunitytothef-inalstageinadvanceoftheexperienceof
thesecondstage.Inotherwords,ifharmonization istoprogresswith
someflexibility andinthelightofexperience ,somedegreeofuncertainty
isanunavoidable consequence.Finally,thereportofthestudytowhich
referencehasalreadybeenmade,suggeststhatthefinalstagerequires
furtherstudyonavarietyofcountsbeforeproposalsareformulated.
Forthesereasons,theCommissionhasconcludedthatitspresentproposal
sh^u^.dbeconfinedtothesecondstage.Hov/ever,ashasalreadybeen
por.rnedout,theproposalisintendedtoreduceboththeperiodanddegree
ofuncertainty byasgreatamarginasispracticable.
V,Thelengthofthesecondsta:-:e
Itisproposedthatthesecondstageshouldrunfrom1July1577to
31December1930-aperiodof3a"years.Athirdandfinalstagewould
thereforecommenceon1January1921*Thisdateis12months ,laterthan
thedeadlineof1January19G0originallyfixedbytheCouncilirits
resolutionof21April1970.However,the
successiveprolongations cfthefipstc;tagehavemadeitextremely -
difficulttomeetthatdeadlinewhilstatthesametimepermittinga
relativelysmoothtransitionfromtheexistingsituation.Asecondstage
ofsignificantly lessthan3s"yearsdurationwouldobligetheCorlission
tobeginpreparationofproposalsforthefinalstagebeforethef.ll
effectofthesecondstageproposalshadbeenfeltinallHember-tites,
sinceIrelandandUK,byvirtueoftheirderogationuntil31Tecem'erX>11.a.te
unlik^Vtobegintheharmonization processuntilsixmonthsaftertheproposed

-7
commencement dateforthesecondstage.Asboth-these-countriesat
presentapplyanexcisewhichisneitherproportional byvaluenor
specificbyunitandhavenoteven-undergonetheeffectsofthefirst
stageofharmonization ,iti3ofparticularimportancethatharmonization
inthesetwocountriesshouldbegiventimetohaveitsfulleffectbefore
measuresforthefinalstageareprepared.Inviewoftheseconsiderations ,
theCommissionfeelsthatasecondstageoftheperiodproposedis
essential.
VI•InclusionofVATintheadvaloremcomponent
Inthefirstdirectiveof1972itwasprovidedthatthespecificcomponent
intheexcisedutyshouldbedeterminedbyreferenoetothesumofthetwo
componentsoftheexciseduty(specificcomponentplusproportional
component).Itisnowproposed,forthesecondandsubsequentstages,
thatthespecificcomponentshouldbecalciliatedbyreferencetothetotal
taxleviedonconsumptionofcigarettes(specificcomponentplus
proportional componentplusproportional VAT).
Inamixedexcisedutysystemsuchasthatestablishedforcigarettes,
VAT,whichisaproportional taxbydefinition ,modifiesallthe
relationships ,sincetheproportional componentoftheexcisedutyis
calculatedonthebasisofaretailsellingprice,inclusiveofalltaxes,
(i.e.,thespecificandproportionalexcisecomponentandalsoVAT).The
incidenceofVATonretailsellingprice,althoughofcoursemuchlessthan
that<ftheexcise,neverthelessvariesappreciably fromonecountryto
another.AtableofVATratesisattachedatAnnex1.Thus,itappears
essentialthatthesizeofthespecificcomponentoftherilixedexcise
dutyshould "hafixed,notinrelationtothetotalexciseduty,butin
relationtothetotaltaxleviedonconsumption (exciseduty+VAT).

VII# Theproposed specific /advalorem relationship during thesecond
stage
TheCommission has "been informed by :theIlenber States that theprovisions
relating tothe .first ,stage (specific component equal tobetween and .,
75^ofthetotal excise duty )have notappreciably affected either the .
tax revenues orthe market conditions inthe seven Member ..States inwhich
these provisions arecurrently applied ..Infact ,this range broadly
reflects the situation which obtained intheoriginal sixMember States :
five Member States each undertook analignment of5f°(0to5%),whilst
oneundertook analignment of.25fo(lOCffo .to75/^)> aresult ofits
accession totheCommunity ,Denmark brought thespecific excise component
to75$ (theUnited Kingdom andIreland having obtained deferment until
31December 1977)#
Theextent towhich thepermitted variation inthe specific component
should becompressed during thesecond stage depends upon avariety of
considerations .First ,theCommission envisage arelatively long .second
stage which will inpractice bethelast stage before thefinal
harmonization ofstructures .Secondly ,thereduction inthe permitted
variation inthespecific component (andconsequently .,theincrease in
therequired minimum percentage forboth thespecific andadvalorem
components )should besufficiently great tooffer amarked stimulus to
market interpenetrat ion ,since theprospect ofincreased export markets
inreturn forpossible reductions indomestic market nhares isinitself
likely tocontribute towards anagreed solution .Forthese tworeasons ,
the movement towards afixed ratio should therefore beconsiderable .
Thirdly ,iftheimpasse encountered inpast discussions onthefinal stage
istobeavoided jthemovement during thesecond stage should notbeso
great astopredicate thefinal structure .Fourthly ,themovement should
beofbroadly comparable magnitude forallMember States .(TheUKand
Ireland could constitute aspecial case .Ifthey usetheir derogation to
thefull ,they will have tomove directly tothesecond stage inonestep
attheendof1977 )*These considerations ,iftaken alone ,would suggest
that thespecific component inthesecond stage should benotless than
20$andnotmore than 6Cffooftheexcise .

-9-
However,theproposaltocalculatethepercentageofthespecific
component "by,referencetothetotaltaxburden(excise+VAT)endto
includeVATwithintheadvaloremcomponentconsiderably modifiesthis
judgement.Allotherthingsbeingequal,thosecountriesatpresent
applyingthemaximumpermittedspecificcomponentwillfindthatinclusion
ofVATwithinthecalculations willoffsettosomeextentthereductionin
thespecificexcise.Consequently ,theadaptationrequiredwillbeless
inpracticethanitappears.33fcrcontrast,thosecountriesatpresent
applyingtheminimumpermittedspecificcomponentwillfindthatinclusion
ofVATwithinthecalculations willaugmenttheadaptationwhichtheyare
requiredtomakeinthesecondstage.
Consequently ,aproposalforthesecondstagetoreducethepermitted
variationinthespecificcomponent(atpresent,between5i°and75$°f
theexcise,exclusiveofVAT)byanequalfigureatbothends,would
obligecertainMemberStatestomr.lceamuchgreateradaptationthanothers.
This.imbalancecouldbebroadlycorrected ..byanasymmetricreductioninthe
specificrangewhichwouldensurecomparablemovements "byallthe
MemberStates.
Forthesereasons,itisproposedthatthepermittedpercentagerangefor
thespecificcomponentduringthesecondstageshouldbenotlessthan
15$andnotmorethan50$ofthetotaltaxburden(excise+VAT).The
changesintaxstructureswhichMemberStatescouldbeexpectedtomakein
responsetotheseprovisionsareshowninAnnex2.
VIII,Comments'onthearticles
Article1 •
ThisArticleprovidesthataccountshallbetakenofVATintheinclusion
oftheexcise,sothatthespecificcomponentisdeterminedbyreference •
tothetotaltaxlevied(specificexcisecomponent+proportionalexcise
component+proportional VAT).
Article2
Eocomment•
•A

-10-
Article3
ThisArticleintroducesanewheading"TitleIII"concerningthespecial
provisionsapplicableduringthesecondstageofharmonization .
Article11(new)
Thefirststageofharmonization providedforinArticle7ofthe
Directiveof19December1972hasalreadybeentwiceextendedby12
months,andnowcoversaperiodof43monthsupto30June1977•This
Articleprovidesthatthesecondstageshallrunfor3ayears,from
1July1977to31December1900.
Article12(new)
Paragraph 1
Thisparagraphincorporates theprinciplepreviouslylaiddownin
Article8(l)oftheDirectiveof19December1972,butalsotakesinto
accountapossiblechangeinthemostpopularpricecategoryforcigarettes.
Suchachangeinthemostpopularpricecategorycouldaswellstemfrom
achangeinconsumertastesasfromachangeinprices.Subjecttothe
requirementforannualreviewand,ifnecessary,amendment,the
possibility ofapricechangerequiringanimmediatetaxchangewillbe
avoided.
Paragraph 2
ThisprovisionreplacesArticle8(2)oftheDirectiveof19December .19725
whichestablishedforthefirststageofharmonization aspecificcomponent
ofbetween5%and75%of"thetotalexcise.Paragraph2providesthatthe
specificcomponentinthesecondstageshallbebetween13$and50$ofthe
totaltaxburden(i.e.,excise+VAT).
Para,;rarh3
Asimilarprovisionisalreadyapplicableduringthefirststage.
,

-11-
Paragraph 4
This provision already applies during thefirst stage .
Theright toexclude customs duties from thebasis 011which the
proportional component iscalculated iscontrary tothegeneral prinoiple
laid down inArticle 4(l)oftheDirective of19December 1972 .However ,
asatransitional measure ,this right mayalso beretained during the
second stage .
Paragraph 5
This provision already applies during thefirst stage .
Background da+a
Also attached forinformation areAnnexes rhowing :-
Annex 3:Spread ofretail prices ofcigarettes ineach Member State ,
Annex 4*Retail price ineach Member State ofthemost popular cigarette ,
and fiscal burden .
Annex 5:Cigarette consumption ,andproportion imported .

JLKÎIEXI
VAToncigarettes
ontheretailprice
(alltaxesincluded)
BELGIUM
LUXEMBOURG
BETHERLANDS
GERMANY
FRANCE
ITALY
DENMARK
UNITEDKINGDOM
IRELAND5.60fo
2f>
12.23$
9.91#
6.96^
15.25?°
13.04$
7.4$
6.32$

AMEXII
Application bytheMemberStatesofthedirectiveof19.12.72
(firststageofharmonisation )andthesituationresulting
fromthedraftdirective(secondstageofharmonisation )
Respectivepartsofthespecificandadvaloremcomponents v'in
thetaxationofcigarettesinthemostpopularpricecategory
Situationat1.9*75
(Firststage)Proposedibr1.7.77
(Secondstage)
Excise VAT;
ITotaltax
(Excise+VAT)Totaltax
(Excise+VAT)
!' --
Spécifie
between
5$and
75$Ad.val.
between
95$and
25$Ad.val.
lOCffo
i
l
lSpec.
iAd.val.
i •Spécifie
"between
15$and
50$Ad.val,
between
85$and
50$
($)($) ($)($)($)($)
IFrance 595 4.595,51585
Italy 595 4961585
IBelgium .•5.3••
4.8<2)94.7 4.3'95.2 •1585
Luxembourg 95.20)4.795.315:85
INetherlands 4.6(2)95.4M
O
1–I
>3.7.96.31585
F.R.G. 74.1 !25.9 '63.6 136.450 :50
IDenmark 74.4 !25.6IU*62.837.250 50
United
Kingdom 10CT4'
100^
111um11nrr-•)b"o89.810.2-<4-(4
IIrelandL_SI9 -(4)
(1)Thespecificcomponentisafixedsumpercigarette.
Theproportional componentiscalculatedontheretailprice.
(2)IntheGrand-DuchyofLuxembourgandintheNetherlandsthespecific
componentno./longerrepresents5$°ftheexcise.
(3)OntheassumptionthateachMemberStatemakesthesmallestchange
permissible .
(4)AtpresentintheUnitedKingdomandIreland,theexciseisbasedonthe
weightoftherawtobacco(derogationuntil31.12.77).

I
iAJMKX.III
Spreadofretailpricesforcigarettesin
eachMemberState
.(index100®mostpopularpriceclass)
300
275
250
2^5
200
175
15Q
125
100
75
50;ΒLux.Neth..PEGIt.DkUK.Irl.
Cigarettesofthemostpopularpriceclass;(injdex100)represented
' •'in1974:'•;'
Belgium
Luxembourg
Netherlands
Germany
Prance
Italy
Denmark
UnitedKingdom
Irelandofcigarettesales
757°
30%«ft.
Il
*1
ff
ft
f«
It
Iff»
If
tf
ft
If
It
ft
fl

\
ANNEX IV
^itualnon in
August 1975
Retail prices ofcigarettes ofthemost
popular price class andtaxburden or .those cigarettes
Retail price per20cigarettes
h
inu.a .Tax "burden (excise +VAT )
-inu.a .
j_Denmark :9*9,^Kr.=1.40u.a.
Germasny : 2.30 DM«O.75 u.a .
UK" 41.5 p.»0.72 u.a .
Ireland : •'34p. »O.59 u.a .
Netherlands :2Fl.(25 )=0.51 u.a.(20 )
Belgium : 27Fr.(25 )=0.47 u.a.(20 )
Italy .: :350Lire =0.43 u.a .
Luxembourg :2!Fr.(25)»0.41 u.a.(20 )
France : 1.70FF .=0.33 u.a.Denmark :83*8^
IGermany
roK
Ireland :lOfo
70.3 *
70.3% =0.41 u.a ,
Netherlands :67%
Italy :74./$
Belgium : 67$
France :72.7^
Luxembourg :60.8"£1.17 u
0.53 u.a
0.51 u.a .
0.34 u.a .
O.32 u.a .
0o31u.a .
O.24u.a .
0.22 u.a .

Consumptionofcigarettes(millions)in-theCommunityAKNEXV
Belgium–Luxembourg 20,236 2,009
Netherlands 23,4236,111
Germany I125,461 I970
Prance I75,3795,695
Italy 80,15114,156
UnitedKingdom :137,400 .1,941
Ireland I6,802 128
Denmark I
I7,603 IM54
\
Communitytotall476,460 32,194Total1211
.Partsuppliedbyimports
'all ofwhich
sources EEC
2,002
3,612
779
5,675
14,144
1,019
100
500
27,831imported
9-9$
2&fo
O.Tfo
1-5$
17.7$
1.4$
2$
15*1%
6.'757'.Total
20,243
23,423
128,017
30,492
87,439
137,000
7,405'
6,796
490,875im
Partsuppliedbyimports
all ofwhich
sources EEC
2,051
3,074
1,255
6,554
21,455
,2,020
.298
789
42,4962,047
7,745
1,005
6,513
21,406
1,533
215
350
40,81410•
imported
10.1$
34.4/o
0.9$
8.1$
24.5$
1.5$
4$
11.6$
8.65%
World(estimate).-3,500,000
Morethan86$ofimports
areofCommunityoriginMorethan96$ofImports
areofCommunityorigin
V
«*

Proposal'foraCouncilDirectiveof
amendingDirectiveUo«72/464/EEC
ontaxesotherthanturnovertaxeswhichaffect
theconsumption ofmanufactured tobacco
THECOUNCILOFTHEEUROPE/JTCOISIUIIITIES ,
HavingregardtotheTreatyestablishing theEuropeanEconomicCommunity,
andinparticularArticles99and-100thereof,
HavingregardtotheproposalfromtheCommission ,
HavingregardtotheopinionoftheEuropeanParliament ,
HavingregardtotheopinionoftheEconomicandSocialCommittee,
Whereas,inaccordancewithCouncilDirectiveNo,72/464/EEC^^of
19December1972,asamendedbyDirectivesNos.74/31'3/SECof25June1974^^
and75//EECof18December,1975^^ontaxesotherthanturnover
taxeswhichaffecttheconsumptionofmanufactured tobacco,theCouncil
must,before3^June1976,adoptaDirectivelayingdownthespecial
criteriaapplicableafterthefirststage,covering,subjectto
Article1(4),aperiodof48monthsfrom1July1973?
Whereas,thespecialcriteriaapplicableduring -thefirststagehave
permittedaninitialapproximation ofthestructuresoftheexciseduties
oncigarettesinsevenofthenineIlemberStates,withoutthetaxrevenue
ofthellenberStatesortheconditionsontheirmarketsbeingappreciably
affected:
^'0Jlio.L303,31December1972,p.1and
(2;0JNo.L130,3July1974,p.30
^OJNo.
•/.

WhereastheUnitedKingdomandIreland,byvirtueofArticle12of
CouncilDirectiveNo.72/464/EECof19December1972,naydefer
applicationof"theaboveDirectivesunti}.31December1977andthatthese
Directiveshave.not"yet,therefore,'hadanypracticaleffectinthose-two
McnborStr;t^s;' "•
Whereasthestructureoftheexcisedutyoncigarettesmustinclude,in
additiontoaspecificcomponentcalculatedperunitoftheproduct,a
proportional componentbasedontheretailsellingprice,inclusiveof
alltaxes;whereasaccountshouldbetakenofthefactthattheVAT
applicabletocigaretteshasthesameeffectasaproportional excise
dutybyfixingtherelationship betweenthespecificcomponentofthe
exciseandthetotaltaxburden;
I'Jhereasitisnecessarytolaydownthespecialprovisionsapplicable
duringasecondstageinsuchmannerastoorientatetheexcisesapplied
tocigarettes bytheHenberStatestowardsacommonstructure;
VJhereasthestructureoftheexcisedutyonmanufactured tobaccoother
thancigaretteswillbedeterminedatalaterdate;
HASADOPTEDTHISDIRECTIVE :

Article 1
Article 4(3)ofCouncil Directive 17o,rJ2// [rSA/ZEGof19December 1972 ,
isamended asfollows :
"3.Atthefinal stage ofharmonization ofstructures ,thesame ratio
shall heestablished forcigarettes inallMember States between
thespecific excise duty andthe sumoftheproportional excise duty
andofVAT ,insuch awaythat therange ofretail selling prices
reflects fairly thedifference inthemanufacturers 1delivery prices "
Article 2
Title IIIandArticles 11,12and13oftheCouncil Directive of
19December 1972 become Title IVandArticles 13,14and 15respectively .
Article 3
Thefollowing neu Title III isinserted intheCouncil Directive of
19December 1972 :
"Title III
Special •provisions applicable during the second strge
ofharmonization
Article 11
1.Without prejudice totheapplication ofArticle 1(4)sthesecond
stage ofharmonization ofthe structures oftheexcise duty on
manufactured tobacroo shall cover theperiod from 1July 1977 "to
31December 1930 .
2.During this second stage ofharmonization ,Article 12shall be
applicable .

-4-
Article 12
1.Theamount ofthespecific excise duty levied oncigarettes shall "be
established byreference tocigarettes intlxe iciest popular price
category according tothedata available on1January ofeach year ,
beginning with 1January 1977 *
2.Thespecific component oftheexcise duty maynot ,belower thar
orhigher than 50/ooftheamount ofthetotal taxburden resulting
from theaggregation oftheproportional excise duty,' the specific
excise duty andtheVAT levied onthese cigarettes ,
3.Iftheexcise duty ortheVATlevied ontheprice class referred to
above isamended after 1January 1977 >theamount ofthespecific
excise duty shall beestablished byreference tothenewtotal tax
burden onthecigarettes referred toinparagraph 1.
4.Inderogation from Article 4(l)»each Ilembcr State nayexclude
cust onsduties fron thebasis ofcalculation oftheproportional
excise duty oncigarettes .
5.TheMember States maylevy oncigarettes aminimum excise duty the
amount ofwhich inaynot ,however ,behigher than $Ofoof,theaggregate
amount oftheproportional excise duty and -thespecific excise duty
which they levy onthecigarettes referred toinparagraph 1."
Article 4
This Directive isaddressed tothe Member States .
Done atBrussels , fortheCouncil ,.
The President .