WRITTEN QUESTION E-3221/02

by Alexandros Alavanos (GUE/NGL) to the Commission

(14 November 2002)

Subject: Obstacles preventing small tobacco growers accessing the market in tobacco products

Some tobacco growers in Greece prefer to market their produce in the form of fine-cut tobacco for rolling cigarettes, thereby creating a cottage industry for cutting and, possibly, packing raw tobacco.

The growers concerned, who live in particularly problematic areas, wish to grow the Mavra and Tsebelia varieties on dry, infertile land, without using fertilisers or pesticides. These varieties are suitable for producing very high quality thin-cut tobacco which can be marketed as natural tobacco at satisfactory prices which will guarantee them a decent income without Community support.

However, the marketing of fine-cut tobacco by Greek growers on the basis of such a small area and minimal resources has run up against provisions and requirements in national law which make it prohibitive in both financial and practical terms to operate such a cottage industry, i.e. in effect they are banned from the market.

1. Is it possible to market such a product once it is taxed and labelled in accordance with current Community and national legislation?

2. Can the Commission, in agreement with the Greek authorities, set out the measures and the cost involved to the producers concerned to comply with the legislation and obtain the relevant permits (guarantees, tax reserves, etc.)?

3. Will the Commission examine the possibility of establishing more flexible procedures to enable those small tobacco growers who are interested and wish to do so to set up a small cottage industry in tandem with their production?

Answer given by Mr Bolkestein on behalf of the Commission

(3 January 2003)

As far as Union legislation in the area of excise duty is concerned, the Commission would like to point out the following, in reply to the three specific questions raised by the Honourable member:

1. Union legislation lays down minimum levels of taxation for tobacco products. These minimum levels were last modified by Council Directive 2002/10/EC(1) amending, inter alia, Council Directive 92/80/EEC of 19 October 1992 on the approximation of taxes on manufactured tobacco other than cigarettes(2). According to this modification, the minimum level of excise duty on fine-cut tobacco for the rolling of cigarettes will have to reach 36 % of the retail-selling price inclusive of all taxes, or EUR 32 per kilogram, by 1 July 2004. The minimum level of excise duty on cigarettes is set at 57 % of the retail selling price, inclusive of all taxes, of cigarettes of the most popular price category, with a minimum of EUR 60 per 1 000 cigarettes (EUR 64 as from 1 July 2006).

The lower minimum rate applied on fine-cut tobacco for the rolling of cigarettes reflects the fact that such tobacco is a semi-finished product, used by consumers who roll their own cigarettes and have to buy additional materials for that purpose. However, Member States are free to determine their tax levels above minimum rate levels. Greece has chosen to apply an excise duty of 59 % of the retail selling price on fine-cut tobacco for the rolling of cigarettes. This duty level is comparable to its overall duty level on cigarettes, amounting to 57,5 % of the retail selling price for cigarettes of the most popular price category.

2. According to Article 11 of Directive 92/12/EEC(3) the production of products subject to excise duty under suspension of that duty shall take place in a tax warehouse. Greek tobacco growers, wishing to also set up a production of fine-cut tobacco, have to obtain an authorization from the Greek tax authorities to be authorized warehousekeepers. The minimum requirements that such warehousekeepers have to respect are laid down in Article 13 of the Directive. Basically, they consist of the provision of a guarantee for the excise duty, keeping appropriate accounts of stocks and product movements, and consenting to checks from the authorities.

It is not possible for the Commission to detail the costs involved for a producer to meet the requirements to become an authorised warehousekeeper. The cost of providing a guarantee is normally not excessive, and should be seen in relation to the deferment of excise duty payment that it allows. Moreover, Member States can waive this requirement, if they deem it to be appropriate. There does not seem to be an additional cost involved in keeping accounts, this is generally part of the normal administration of the business of course. Moreover, within the limits set by the Directive, Member States already have flexibility in fixing and simplifying the obligations to be respected by producers of excise products.

3. The Commission has not received a request from the Greek authorities to introduce more flexible procedures. The Commission is of the opinion that the fiscal obligations outlined are not a particular impediment to tobacco growers setting up a production of fine-cut tobacco.

As regards other than fiscal requirements laid down in Community legislation, such as those concerning the labelling of tobacco products, the Commission would point out that marketing, presentation and sale of fine-cut tobacco is subject to the labelling requirements set out in Article 5, of Directive 2001/37/EC(4), concerning the manufacture, presentation and sale of tobacco products, in particular paragraphs 2, 5, 6 and 7 thereof.

(1) Council Directive 2002/10/EC of 12 February 2002 amending Directives 92/79/EEC, 92/80/EEC and 95/59/EC as regards the structure and rates of excise duty applied on manufactured tobacco, OJ L 46, 16.2.2002.

(2) OJ L 316, 31.10.1992.

(3) Council Directive 92/12/EEC of 25 February 1992 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products, OJ L 76, 23.3.1992, as last amended by Directive 2000/47/EC of 20 July 2000, OJ L 197, 29.7.2000.

(4) Directive 2001/37/EC of the Parliament and of the Council of 5 June 2001 on the approximation of the laws, regulations and administrative provisions of the Member States concerning the manufacture, presentation and sale of tobacco products Commission statement, OJ L 194, 18.7.2001.