Proposal for a Council Directive amending Directives 92/79/EEC, 92/80/EEC and 95/59/EC on the structure and rates of excise duty applied on manufactured tobacco {SEC(2008) 2266} {SEC(2008) 2267}
Date: 2008-07-16
Institutions: European Commission
Subjects: excise duty, tax harmonisation, tax on consumption, tobacco, tobacco industry

EN 

EN 

   EN 

 
 
COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 16.7.2008 
COM(2008) 459 final 

2008/0150 (CNS) 

Proposal for a 

COUNCIL DIRECTIVE 

amending Directives 92/79/EEC, 92/80/EEC and 95/59/EC on the structure and rates of 
excise duty applied on manufactured tobacco  

(presented by the Commission) 

{SEC(2008) 2266} 
{SEC(2008) 2267} 

EN 

   EN 

 
 
 
  
 
EXPLANATORY MEMORANDUM 

1) 

CONTEXT OF THE PROPOSAL 

•  Grounds for and objectives of the proposal 

Under Article 4 of Council Directive 92/79/EEC of 19 October 1992 on the approximation of 
taxes on cigarettes1 and Article 4 of Council Directive 92/80/EEC of 19 October 1992 on the 
approximation  of  taxes  on  manufactured  tobacco  other  than  cigarettes2  the  European 
Commission  is  required  to  examine  every  four  years  the  smooth  operation  of  the  single 
market,  the  real  value  of  excise-duty  rates  and  the  wider  objectives  of  the  Treaty.  This 
examination  is  supposed  to  extend  to  relevant  provisions  of  Directive  95/59/EC  of  27 
November  1995  on  taxes  other  than  turnover  taxes  which  affect  the  consumption  of 
manufactured tobacco3. Given the characteristics of manufactured tobacco products, particular 
attention needs to be paid to health policy considerations.  

This  proposal  for  a  Directive  suggests  a  number  of  important  amendments  to  existing 
Community legislation in order to modernise and simplify the existing rules, make them more 
transparent  and  better  integrate  public  health  concerns.  In  addition,  this  proposal  deals  with 
the  alignment  of  excise  duties  for  fine-cut  smoking  tobacco  ("roll-your-own")  with  excise 
duties for cigarettes.  

The  proposed  amendments  are  the  result  of  an  in-depth  examination  conducted  by  the 
Commission.  The  conclusions  of  this  examination  are  set  out  in  the  attached  Commission 
report. 

•  General context 

As  stated  above,  Article  4  of  Directives  92/79/EEC  and  92/80/EEC  stipulates  that  the  rates 
and structure of excise duty are to be reviewed every four years. 

In  accordance  with  this  provision,  in  September  1995  the  Commission  presented  its  first 
report4. This report noted that, in general, little approximation had taken place, but concluded 
that more detailed analysis and consultation with interested parties was necessary before final 
decisions were taken on modifying the legislation.  

The  second  report,  presented  by  the  Commission  in  May  19985,  suggested  that  only  a  few 
technical amendments to existing Community legislation were necessary and concluded that 
the structures and rates of excise duty could remain unchanged. The report was accompanied 
by  a  proposal  for  a  Directive  amending  the  existing  tobacco  legislation  to  incorporate  the 
recommended  technical  adjustments.  The  proposal  was  adopted  by  the  Council  on  29  July 
1999  as  Directive  1999/81/EC.  However,  the  Commission  was  asked  by  a  large  number  of 
Member States, in a statement entered in the Council minutes, to consider a more fundamental 
review of the rates and structures of excise duties on tobacco products. 

1 
2 
3 
4 
5 

OJ L 316, 31.10.1992, p.8 last amended by Directive 2002/10/EC (OJ L 046, 16.02.2002, p.26) 
OJ L 316, 31.10.1992, p.10 last amended by Directive 2002/10/EC (OJ L 046, 16.02.2002, p.26) 
OJ L 291, 6.12.1995, p. 40, last amended by Directive 2002/10/EC (OJ L 046, 16.02.2002, p.26) 
COM(95)285 final, 13/09/1995. 
COM(98)320 final, 15.05.1998 

EN 

2 

   EN 

 
                                                 
In March 2001, the Commission presented its third report6. The report was accompanied by a 
proposal  for  a  Directive  introducing  significant  revisions.  For  cigarettes,  the  Commission 
proposed a minimum fixed amount of excise duty of € 70 per 1000 cigare ttes in the MPPC, in 
addition to the existing minimum requirement of 57%, so as to ensure greater approximation 
of  tax  levels  between  Member  States.  The  Commission  proposal  also  provided  for  taxation 
similar  to  that  of  cigarettes  for  competing  tobacco  products  such  as  fine-cut  tobacco.  The 
proposal was adopted by the Council on 12 February 2002 as Directive 2002/10/EC. However 
the Council only agreed on € 64 as minimum fi xed amount introduced, and did not align the 
minimum rates for fine-cut tobacco with the minimum rates for cigarettes. In this context, the 
Commission, upon request of a number of  Member States,  made the following statement to 
the Council minutes on Directive 2002/10/EC: "The Commission states that, in its next review 
report provided for under Article 4 of Directive 92/79/EEC and Directive 92/80/EEC, it will 
present sufficient elements in order to proceed to an overall review of the possibility to bring 
the structure of excise duties for fine-cut smoking tobacco into line with the structure of excise 
duties for cigarettes".  

The current review is the fourth one and suggests again a number of significant amendments 
to existing Community legislation in order to modernise the existing rules and ensure a level 
playing  field  for  the  operators.  In  addition,  the  public  health  protection  is  a  crucial  issue  in 
this review given that the European Community became party , on 30 June 2005, to the WHO 
framework  convention  on  tobacco  control  and  that  several  Member  States  demand  that  a 
higher level of human health protection and consequently higher European minima for excise 
duties  on  tobacco.  Finally,  given  the  aforementioned  Commission  statement,  this  proposal 
deals with the alignment of excise duties for fine-cut smoking tobacco ("roll-your-own") with 
excise duties for cigarettes.  

•  Existing provisions in the area of the proposal 

The current provisions are laid down in Directives 92/79/EEC, 92/80/EEC and 95/59/EC. 

These arrangements were introduced on 1 January 1993. They are the outcome of discussions 
which started in 1985 with the White Paper on completing the internal market, in which the 
Commission  proposed  full  harmonisation  of  excise  duties  on  manufactured  tobacco. 
However,  the  Council  chose  not  to  take  this  approach  and  harmonisation  extended  only  to 
taxation structures and to minimum rates.  

•  Consistency with the other policies and objectives of the Union 

This proposal is in line with the main policies and objectives of the Union.  

Article  152  of  the  Treaty  provides  that  a  high  level  of  human  health  protection  shall  be 
ensured in the definition and implementation of all Community policies and activities. Given 
the  characteristics  of  manufactured  tobacco  products,  particular  attention  has  therefore  been 
paid to the relationship between public health and the final price of the products, taking stock 
of the WHO Framework Convention on Tobacco Control. 

6 

COM(2001)133 final, 14.03.2001 

EN 

3 

   EN 

 
                                                 
Smoking is still the biggest single form of avoidable death in the Community and one of the 
leading  causes  of  morbidity  and  mortality  in  the  EU,  with  about  650,000  smoking-related 
deaths per year in the Community.  

Taxation  forms part  of  an overall  strategy  of prevention and dissuasion which also includes 
other  reduction  demand  measures  such  as  non-price  measures,  protection  from  exposure  to 
tobacco smoke, regulation of the contents, etc. However, according to the World Bank price 
increases of tobacco products are the most effective single intervention to prevent smoking. A 
price  increase  of  10  %  decreases  consumption  on  average  by  about  4%  in  high  income 
countries  among  adults.  Importantly,  the  impact  of  higher  prices  is  likely  to  be  greatest  on 
young people, who are more responsive to price rises than older people.  

This proposal suggests the setting of a monetary minimum duty and establishing a tax "floor" 
for  all  cigarettes  sold  in  the  EU  allowing  to  address  health  concerns  for  all  categories  of 
cigarettes.  It  increases  the  minimum  requirements  in  order  to  contribute  to  a  reduction  in 
tobacco  consumption  over  the  forthcoming  five  years,  notably  by  preventing  that  Member 
States' tobacco control policies be undermined by considerably lower levels in other Member 
States.  In  addition  the  proposal  allows  Member  States  greater  flexibility  to  apply  specific 
duties and to levy minimum excise duties on cigarettes in order to achieve health objectives. 
Finally it brings the minimum rates and structure for fine-cut tobacco intended for the rolling 
of  cigarettes  into  line  with  the  rate  and  structure  for  cigarettes  in  order  to  discourage 
substitution of cigarettes by fine cut. 

2) 

CONSULTATION  OF 
ASSESSMENT 

INTERESTED 

PARTIES  AND 

IMPACT 

•  Consultation of interested parties 

A  broad  consultation  process  preceded  this  report.  The  Commission  services  requested  the 
taxation authorities of the Member States to give their views on a possible overall review of 
excise  rates  and  structures  for  tobacco  products  on  the  basis  of  a  questionnaire.  The  replies 
were used as a basis for subsequent bilateral discussions between the national administrations 
and  the  Commission  departments  concerned.  Associations  and  other  stakeholders  (trade, 
health,  etc.)  were  also  invited  to  submit  position  papers  via  a  public  web-  consultation. 
Collection and use of expertise 

Beyond  the  comprehensive  consultation  of  interested  parties,,  position  papers  and  articles 
have been taken into account in the impact assessment. 

•  Impact assessment 

The  Commission  services  made  an  impact  assessment  focusing  on  potential  measures  that 
could  modernise  or  add  more  transparency  to  the  structure  of  excise  duties  on  tobacco 
products. In addition, particular attention was paid to the relationship between public health 
and  the  final  price  of  the  products,  taking  stock  of  the  WHO  Framework  Convention  on 
Tobacco Control, as well as to the options to bring the structure and the rates of excise duties 
for fine-cut smoking tobacco ("roll-your-own"), into line with excise duties for cigarettes. 

In order to examine how the different objectives for tobacco taxation could be addressed, the 
Commission assessed four basic approaches. 

EN 

4 

   EN 

 
The  first  approach  consists  of  not  intervening  further  at  Community  level  (the  no  policy 
change  option).  This  approach  will  not  solve  the  problem  of  distortions  of  cross-border 
shopping and smuggling currently existing on the tobacco market, which has consequences in 
terms of revenue and health protection. It will not resolve the fiscal instability and distortions of 
competition which are currently created by the most popular price category (MPPC) concept. It 
will  also  not  address  the  problem  of  substitution  and  tax  induced  distortions  of  competition 
between  the  different  products  of  manufactured tobacco.  It  was  therefore  not  an  option  that 
the Commission chose to pursue. 

The  second  approach  option  consists  of  changing  only  the  structure  of  excise  duties  on 
cigarettes.  In  order  to  resolve  the  fiscal  instability  and  distortions  of  competition  which  are 
currently created by the MPPC concept, the Impact assessment examines abolishing the concept 
of  the  MPPC  as  benchmark  for  minimum  requirements.  Instead,  EU  minimum  requirements 
could  either  apply  to  all  cigarettes  or  apply  in  accordance  with  weighted  average  prices 
(WAP). Simultaneously the impact is assessed of providing more flexibility to Member States 
as concerns the structure of the excise duties at national level. 

In  general  this  approach  would  only  have  a  minor  impact  on  the  tobacco  markets  and  on 
Member  States'  revenues.  Neither  a  57%  rule  on  all  cigarettes  or  on  WAP  would  entail  an 
increase  of  administrative  costs  for  any  of  the  stakeholders.  Both  options  would  simplify  the 
arrangements as compared to the current situation. However only applying the minimum of €64 
on all cigarettes would create a tax floor for all cigarettes in the EU. It would also reduce the 
tax and price gap between Member States more than the other options and, to an appreciable 
extent,  integrate  public  health  concerns.  Therefore  this  option  gets  priority  from  an  internal 
market and  a health point of view.  On  the  other  hand,  applying  the  57%  rule  on  all  cigarettes 
would for a number of Member States result in a compulsory ad valorem duty and not be in line 
with the objective to provide more flexibility to Member States as concerns the relation specific 
and ad-valorem duties. Therefore applying the 57% rule on WAP is the favoured option. 

The second approach would, however, not sufficiently take account of health considerations.  

The third approach consists of changing minimum rates of excise duties on cigarettes in 
addition  to  the  structure.  The  Impact  assessment  simulated  increases  of  the  minimum  rates  of 
excise duties on cigarettes, either the 57% and/or the minimum of €64 per 1000 cigarettes in 
the sub-options. Again an increase of the monetary minimum is the best instrument to achieve 
approximation of taxes and prices of cigarettes in the EU in the interest of the Internal market 
and with a view to tobacco control. An increase of the 57% rule would require an update of 
the escape clause, which is currently set at €101. An update to 
€122 would keep pace with the 
recent evolution of excise duties on cigarettes in the Internal Market and would have the same 
effect as in 2001, namely cover the five highest taxing Member States. 
In view of the above, the Commission has considered a number of possible increases. 

An increase to €90 on all cigarettes and 63%  on WAP would trigger a probable decrease of 
demand  of  on  average  10%  in  22  Member  States.  In  addition  it  would  pave  the  way  for 
further  increases  of  excise  duties  on  cigarettes,  also  by  those  Member  States  which  already 
have  a  high  level  of  taxation.  Apart  from  BG  and  RO  it  would  not  render  prices  over 
expensive as compared to the local purchasing power in the Member States. 

All  in  all,  in  the  field  of  cigarettes,  this  approach  appears  best  suited  to  ensure  the  proper 
functioning of the Internal Market and, at the same time, a high level of health protection. 

EN 

5 

   EN 

 
The  fourth  approach  consists  of  changing  the  structures  and  minimum  rates  of  excise 
duties  on  other  products,  in  particular  fine-cut  tobacco,  in  order  to  avoid  substitution  of 
cigarettes by less taxed tobacco products. 

The  substantial  differences  in  tax  levels  among  Member  States  on  fine-cut  tobacco  entail 
smuggling and cross border shopping between a number of neighbouring countries and give 
rise to distortions in the internal market. In addition, the gap between the level of taxation of 
cigarettes  and  fine-cut  tobacco  gives  rise  to  substitution.  There  is  little  justification  for 
significant  differences  in  the  minimum  rates  for  these  products  at  Community  level.  This 
applies  both  in  a  perspective  of  fair  competition  and,  given  the  harmful  character  of  both 
products,  from  a  health  point  of  view.  Therefore  the  minimum  rates  for  fine-cut  tobacco 
intended for the rolling of cigarettes should be brought into line with the rate for cigarettes. 

For  fine-cut  Member  States  may  choose  between  complying  with  a  monetary  or  an  ad 
valorem  minimum  rate.  However  since  the  monetary  minimum  requirement  is  the  best 
approximating  factor,  there  should  be  (in  addition  to  the  ad  valorem  minimum  rate)  a 
compulsory monetary minimum rate for all Member States, as for cigarettes. 

Taking  account  of  the  specific  characteristics  of  fine  cut  tobacco,  it  is  reasonable  that  the 
minimum  excise  for  fine-cut  tobacco  could  be  fixed  at  about  two  thirds  of  the  minimum 
excise incidence for cigarettes. In order to respect a two thirds relationship between fine-cut 
and cigarettes, the monetary minimum requirement should be fixed at €43 per kilogram and 
the proportional minimum requirement at 38%.  

Applying the aforementioned 2:3 relationship on the suggested increases for cigarettes, would 
increase the minimum rates for fine cut to €60 and 42% over a period of five years.  

3) 

LEGAL ELEMENTS OF THE PROPOSAL 

•  Summary of the proposed action 

The Commission proposes: 

to  abolish  the  MPPC  as  a  reference  point  for  EU  minimum  requirements  on  excise 

- 
duties and for measuring the importance of of specific excise duty within the total tax burden 

The MPPC, as benchmark for minimum rates, is not in line with Internal Market objectives as 
it entails a partition of the tobacco markets of the Member States. Moreover, abolishing the 
MPPC  would  significantly  simplify  the  arrangements,  create  a  level  playing  field  for 
manufactures  and  underscore  health  objectives.  Instead  it  is  proposed  that  the  minimum 
requirement of €64 will be applied to all ciga rettes which would make the existing situation 
more transparent and establish a "tax floor" for cigarettes sold in the EU, addressing Internal 
Market and health concerns for all categories of cigarettes. Simultaneously it is proposed that 
weighted average prices would be the benchmark for the other minimum requirements. This 
would resolve the fiscal instability that is created by the MPPC concept and it would provide 
a fair and neutral competitive environment for tobacco manufacturers. 

For  similar  reasons,  the  MPPC  should  no  longer  be  a  benchmark  for  measuring  the 
importance  of  specific  excise  duty  within  the  total  tax  burden  (Article  16(2)  of  Directive 
95/59/EC). The reference should be the WAP instead. 

EN 

6 

   EN 

 
to  increase  gradually  the  minimum  requirement  for  cigarettes  in  line  with  internal 

- 
market objectives and health considerations 

Greater  convergence  is  needed  in  order  to  ensure  the  proper  functioning  of  the  Internal 
Market.  Indeed,  there  are  still  considerable  differences  between  tax  levels  in  the  various 
Member States. In order to reach this objective, the minimum tax levels need to be increased. 

The consumption of cigarettes in the EU decreased during the period 2002-2006 by slightly 
more than 10%. Over the same period the excise duties on cigarettes increased on average by 
ca. 33%. In order to trigger a similar decline in consumption over the coming 5 years further 
increases in excise duties would be desirable. Taking into account a price elasticity of -0.43 as 
suggested by the World Bank, a 25% price increase is needed to achieve a 10% reduction in 
demand.  From  a  health  perspective  an  increase  to  €90  on  all  cigarettes  and  63%  on  WAP 
would  trigger  a  probable  decrease  of  demand  of  on  average  10%  in  22  Member  States,  in 
particular through protecting the results of policies conducted by Member States in the field 
of  taxation.  In  addition  it  would  pave  the  way  for  further  increases  of  excise  duties  on 
cigarettes, also by those Member States which already have a high level of taxation. 

These  increases  should  be  gradually  introduced  over  a  period  of  5  years,  namely  by  31 
December 2013 at the latest. In order to take into account that the current transitional periods, 
granted under the Acts of Accession, have not expired yet for a number of Member States, the 
transposition period is prolonged for those Member States with 1 or 2 years depending on the 
current remaining transitional periods. 

to allow Member States greater flexibility to apply specific duties and to levy minimum 

- 
excise duties on cigarettes; 

As  stated  in  the  Commission  report,  from  an  internal  market,  budgetary  as  well  as  a  health 
point of view, specific and minimum duties have clear advantages and more flexibility could 
be provided to those Member States that place greater reliance on specific excise duties or on 
minimum duties. 

However,  in  order  to  avoid  a  situation  of  purely  specific  taxation  in  one  Member  State  and 
purely  ad  valorem  taxation  in  a  neighbouring  Member  State,  which  would  result  in  cross 
border flow for premium brands from the first to the second Member State with bottom priced 
brands  flowing  in  the  opposite  direction,  some  consistency  of  excise  tax  structures  remains 
desirable.  Therefore  it  is  proposed  to  widen  the  band  from  5%  -  55%  to  10%  -  75%  of  the 
total tax burden. 

As  concerns  minimum  excise  duties,  Member  States  are  allowed  greater  flexibility  by  not 
longer restricting the level of the minimum tax to the excise due on the MPPC, as is currently 
the case for other tobacco products. 

to bring gradually the minimum rates for fine-cut tobacco intended for the rolling of 

- 
cigarettes into line with the rate for cigarettes; 

In  line  with  the  structure  of  minimum  rates  on  cigarettes,  it  is  proposed  to  introduce  a 
compulsory monetary and ad-valorem minimum requirement for fine-cut tobacco. In order to 
respect  a  two  thirds  relationship  between  fine-cut  and  cigarettes,  the  monetary  minimum 
requirement should be fixed at €43 per kilogr am and the proportional minimum requirement 
at 38%.  

EN 

7 

   EN 

 
Applying the aforementioned 2:3 relationship on the proposed increases for cigarettes, would 
increase the minimum rates for fine cut to €60 and 42%. 

to  adjust  for  inflation  the  minimum  requirements  for  tobacco  products  other  than 

- 
cigarettes and fine-cut tobacco intended for the rolling of cigarettes. 

An adjustment of the specific excise duty for cigars and cigarillos and for smoking tobacco 
(other than fine-cut tobacco intended for the rolling of cigarettes) is needed to take account of 
inflation  for  the  period  2003  to  2007.  On  the  basis  of  Eurostat  data  on  the  annual  rate  of 
change of the HICP (Harmonised Index of Consumer Prices) between 2003 and 2007, the rate 
of  inflation  can  be  estimated  at  around  2%  a  year  or  at  8%  over  the  period  as  a  whole. 
Applying  this  percentage  to  the  minimum  specific  amounts  and  rounding  up  to  the  nearest 
unit gives €12 for cigars and cigarillo s and €22 for other smoking tobacco.  

- 

- 

to amend the existing definition of cigarettes, cigars and other smoking tobacco. 

amending the definition of cigarettes 

A roll of tobacco is, for excise duty purposes, considered as two cigarettes where, excluding 
filter  or  mouth  piece,  it  is  longer  than  9 cm  but  not  longer  than  18 cm,  or  three  cigarettes 
where, excluding filter or mouthpiece, it is longer than 18 cm but not longer than 27 cm, and 
so on. In order to reduce the excise duties on cigarettes, new products have been marketed, 
consisting of rolls of 18 cm and separate filter tubes. The rolls are subsequently cut into three 
pieces and inserted in the filter tubes. Consequently three cigarettes are taxed as two. In order 
to  stop  this  trend,  a  roll  of  tobacco  should  be  considered  as  two  cigarettes  when,  excluding 
filter or mouth piece, it is longer than 9 cm but not longer than 12 cm, as three cigarettes when 
it is longer than 12 cm but not longer than 15 cm, and so on  

- 

amending the definition of cigars 

Several  Member  States  and  the  trade  have  reported  that  new  products  have  appeared  which 
are  marketed  as  cigars  -  they  have  the  colour  of  a  cigar  or  cigarillo,  rather  than  the  white 
colour  of  a  cigarette  –  but  in  terms  of  function,  taste  and  presentation  must  be  regarded  as 
cigarette  substitutes.  Therefore  it  is  preferable  to  remove  the  relevant  provision  (Article  3 
point  3  of  Directive  95/59/EC)  completely  from  the  current  cigar  definition.  Such  an 
amendment  would  ensure  uniform  taxation  of  these  products  and  restrict  application  of  the 
lower minimum rate to traditional cigars and cigarillos.  

- 

amending the definition of pipe–tobacco 

The definition of smoking tobacco should be adapted in order to better differentiate between 
pipe  and  fine-cut  tobacco  and  to  avoid  inappropriate  taxation.  It  is  proposed  to  increase  the 
minimum cut-width for pipe tobacco from the current 1 mm to 1,5 mm.  

- 

monitoring the arrangements for tobacco taxation  

Article  4  of  Directives  92/79/EEC  and  92/80/EEC  stipulates  that  the  Commission  shall 
regularly  examine  the  structure  and  rates  of  excise  duty.  However  in  order  to  carry  out  this 
examination,  the Commission needs information  on the  quantities and  prices of  the tobacco 
products released for consumption in the Member States. In order to ensure an efficient and 
effective  collection  of  this  information  from  all  Member  States,  new  rules  are  proposed 
regarding  the  provision  of  information  on  tobacco  taxation,  as  well  as  the  definition  of  the 
necessary statistical data.  

EN 

8 

   EN 

 
•  Legal basis 

Treaty establishing the European Community, and in particular Article 93 thereof. 

•  Subsidiarity principle 

The  proposal  falls  under  shared  Community  and  Member  State  competence.  Therefore,  the 
subsidiarity principle applies. 

Although  the  existence  of  the  current  EU  minimum  rates  limits  the  divergences  in  national 
excise duty rates on tobacco products, it has not been sufficient to prevent the persistence of 
significant  divergences,  despite  the  increasing  attention  paid  by  Member  States  to  the 
achievement  of  health  objectives  in  this  field.  These  divergences  entail  substantial  cross 
border  shopping  and  smuggling,  which  creates  distortions  of  competition  in  the  tobacco 
market, leads to losses in budgetary resources for those Member States applying a relatively 
high excise duty and moreover undermines the health policy objectives. 

No EU action would be detrimental since tax policy interaction among Member States has not 
led  to  a  reduction  in  divergences.  Therefore  only  a  change  of  the  existing  provisions,  as 
explained  above,  is  capable  of  remedying  the  existing  situation.  Such  a  change  can  only  be 
operated by the Community legislator himself, author of the Directives to be amended.  

•  Proportionality principle 

The proposal complies with the proportionality principle for the following reason(s). 

The objectives of the current review are best achieved by amending the current Directives to 
the effect explained above. . 

The proposal consists notably in increasing the minimum rates in order to ensure the proper 
functioning  of  the  Internal  Market  without  fiscal  borders  and  to  safeguard  Member  States 
health  objectives.  Above  the  minima,  Member  States  retain  sovereignty  to  set  excise  duty 
rates  at  levels  they  consider  appropriate  according  to  their  own  national  circumstances. 
Simultaneously,  this  proposal  allows  Member  States  greater  flexibility  to  determine  the 
structure of the excise duties and to levy minimum excise duties on cigarettes.  

The  proposal  is  thus  limited  to  what  is  necessary  in  order  to  achieve  the  objectives  of  the 
Treaty. 

•  Choice of instruments 

Proposed  instruments:  Directive.  In  this  area  already  covered  by  a  series  of  Directives, 
Member  State  should  continue  to  retain  an  important  margin  of  flexibility,  as  explained 
above. Other means than amending Directives would thus be inadequate.  

4) 

BUDGETARY IMPLICATIONS 

The adoption of the proposal could in theory have an impact on the calculation of the VAT 
own resource. However the implication will be insignificant and in any case, not measurable.

EN 

9 

   EN 

 
2008/0150 (CNS) 

Proposal for a 

COUNCIL DIRECTIVE 

amending Directives 92/79/EEC, 92/80/EEC and 95/59/EC on the structure and rates of 
excise duty applied on manufactured tobacco  

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, and in particular Article 
93 thereof, 

Having regard to the proposal from the Commission7, 

Having regard to the opinion of the European Parliament8, 

Having regard to the opinion of the European Economic and Social Committee9, 

Whereas: 

(1) 

(2) 

In accordance with Article 4 of Council Directive 92/79/EEC of 19 October 1992 on 
the  approximation  of  taxes  on  cigarettes10  and  Article  4  of  Council  Directive 
92/80/EEC  of  19  October  1992  on  the  approximation  of  taxes  on  manufactured 
tobacco other than cigarettes11 an in-depth review has been carried out of the rates and 
structure  of  excise  duties  on  tobacco  products.  That  review  included  provisions  of 
Council Directive 95/59/EC of 27 November 1995 on taxes other than turnover taxes 
which affect the consumption of manufactured tobacco12. 

In order to ensure the proper functioning of the internal market and, at the same time, a 
high level of health protection, as required by Article 152 of the EC Treaty, bearing in 
mind  that  the  Community  is  Party  to  the  World  Health  Organization’s  Framework 
Convention  on  Tobacco  Control  (FCTC),  different  changes  should  be  made  in  the 
matter. These changes should take account of the situation prevailing for each of the 
various tobacco products. 

(3) 

As  regards  cigarettes,  the  arrangements  should  be  simplified  so  as  to  create  neutral 
conditions of competition for manufactures, to reduce the partitioning of the tobacco 

7 
8 
9 
10 

11 
12 

OJ C , , p. . 
OJ C , , p. . 
OJ C , , p. . 
OJ L 316, 31.10.1992, p.8; Directive as last amended by Directive 2003/117/EC (OJ L 333, 20.12.2003, 
p.49). 
OJ L 316, 31.10.1992, p10; Directive as last amended by Directive 2003/117/EC 
OJ L 291, 06.12.1995, p. 40 Directive as last amended by Directive 2002/10/EC (OJ L 46, 16.02.2002, 
p.26). 

EN 

10 

   EN 

 
                                                 
markets  and  to  underscore  health  objectives.  To  this  end,  the  concept  of  the  most 
popular  price  category  should  be  replaced;  the  price  related  minimum  requirement 
should  refer  to  the  weighted  average  retail  selling  price,  whereas  the  monetary 
minimum  should  be  applicable  to  all  cigarettes.  For  similar  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. 

(4)  Member  States  should  be  given  more  effective  means  to  levy  specific  or  minimum 

excise duty on cigarettes, so as to ensure a minimum monetary amount of taxation. 

(5) 

(6) 

(7) 

(8) 

(9) 

As  regards  fine-cut  tobacco  intended  for  the  rolling  of  cigarettes,  the  Community 
minima should be expressed in such a way as to obtain effects similar to those in the 
field  of  cigarettes.  To  this  end,  it  should  be  provided  that  national  levels  of  taxation 
have to comply both with a minimum expressed as percentage of the retail price and 
one expressed as a fixed amount. 

The  changes  of  prices  and  excise  levels  have  been  analysed,  in  particular,  for 
cigarettes, by far the most important category of tobacco products, as well as for fine 
cut-tobacco intended for the rolling of cigarettes. The analysis shows that there are still 
considerable differences between Member States which may disturb the operation of 
the internal market. Greater convergence between the tax levels applied in the Member 
States would help reduce fraud and smuggling within the Community. 

Greater  convergence  would  also  help  to  ensure  a  high  level  of  human  health 
protection.  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 of cigarettes and fine-cut tobacco intended for the rolling of 
cigarettes and thus jeopardise the achievement of tobacco control objectives. 

In  order  to  achieve  greater  convergence  and  to  reduce  consumption,  the  Community 
minimum levels of taxation for cigarettes and fine-cut tobacco intended for the rolling 
of cigarettes should be increased. 

Before that increase, it is necessary to bring the minimum levels for fine-cut tobacco 
intended  for  the  rolling  of  cigarettes  closer  to  the  minimum  levels  applicable  to 
cigarettes, so as to better take account of the degree of competition existing between 
the two products, reflected in consumption patterns observed, as well as their equally 
harmful character. 

(10) 

In  the  interests  of  uniform  and  fair  taxation,  the  definition  of  cigarettes,  cigars  and 
cigarillos and of other smoking tobacco should be adapted so that, respectively, rolls 
of tobacco which according to their length can be considered as two cigarettes or more 
are  treated  as  two  cigarettes  or  more  for  excise  purposes;  a  type  of  cigar  which  is 
similar in many respects to a cigarette is treated as a cigarette for excise purposes; and 
smoking tobacco which is similar in many respects to fine-cut tobacco intended for the 
rolling of cigarettes is treated as fine-cut tobacco for excise purposes. 

(11) 

In  order  to  avoid  a  fall  in  the  value  of  the  Community  minimum  levels  of  duty  on 
cigars,  cigarillos  and  smoking  tobaccos  other  than  fine-cut  tobacco  intended  for  the 
rolling  of  cigarettes,  it  is  necessary  to  increase  the  minimum  levels,  expressed  as  a 
specific amount. 

EN 

11 

   EN 

 
(12)  Directives  92/79/EEC,  92/80/EEC  and  95/59/EC  should  therefore  be  amended 

accordingly, 

HAS ADOPTED THIS DIRECTIVE: 

Article 1 

Directive 92/79/EEC is amended as follows: 

(1) Article 2 is replaced by the following: 

“Article 2 

1. Member States shall ensure that excise duty (specific duty and ad valorem duty) 
on cigarettes represents at least 57 % of the weighted average retail selling price of 
cigarettes sold. That excise duty shall not be less than EUR 64 per 1 000 cigarettes 
irrespective of the weighted average retail selling price. 

However, Member States which levy an  excise  duty of at  least  EUR 101  per 1 000 
cigarettes on the basis of the weighted average retail selling price need not comply 
with the 57% requirement set out in the first subparagraph.  

2.  As  from  1  January  2014,  Member  States  shall  ensure  that  excise  duty  (specific 
duty  and  ad  valorem  duty)  on  cigarettes  represents  at  least  63 %  of  the  weighted 
average retail selling price of cigarettes sold. That excise duty shall not be less than 
EUR 90 per 1 000 cigarettes irrespective of the weighted average retail selling price. 

However, Member States which levy an  excise  duty of at  least  EUR 122  per 1 000 
cigarettes on the basis of the weighted average retail selling price need not comply 
with the 63% requirement set out in the first subparagraph. 

3. The weighted average retail selling price shall be determined at 1 January of each 
year, by reference to the year n-1, on the basis of the total releases for consumption, 
and prices including all taxes.  

4. By way of derogation from paragraph 2 the second and third subparagraphs of this 
paragraph shall apply. 

Poland, Hungary and Slovakia shall be authorised to bring into force the provisions 
necessary to comply with paragraph 2 by 31 December 2014 at the latest; they shall 
apply those provisions from 1 January 2015. 

Romania,  Bulgaria,  Lithuania,  Estonia  and  Latvia  shall  be  authorised  to  bring  into 
force the provisions necessary to comply with paragraph 2 by 31 December 2015 at 
the latest; they shall apply those provisions from 1 January 2016. 

5.  Member  States  shall  gradually  increase  excise  duties  in  order  to  reach  the 
requirements  referred  to  in  paragraph  2  on  the  dates  set  in  paragraphs  2  and  4 
respectively. 

EN 

12 

   EN 

 
6.  The  Commission  shall  publish  once  a  year  the  value  of  the  euro  in  national 
currencies to be applied to the amounts of the overall minimum excise duty. 

The exchange rates to be applied shall be those obtained on the first working day of 
October and published in the Official Journal of the European Union and shall apply 
as from 1 January of the following calendar year.” 

(2) Article 2a is replaced by the following:  

“Article 2a 

1. Where a change in the weighted average retail selling price of cigarettes occurs in 
a  Member  State,  thereby  bringing  the  excise  duty  below  the  levels  specified  in 
paragraphs  1  and  2  of  Article  2  respectively,  the  Member  State  concerned  may 
refrain  from  adjusting  that  duty  until  no  later  than  1  January  of  the  second  year 
following that in which the change occurs. 

2. Where a Member State increases the rate of value-added tax on cigarettes, it may 
reduce  the  excise  duty  up  to  an  amount  which,  expressed  as  a  percentage  of  the 
weighted  average  retail  selling  price,  is  equal  to  the  increase  in  the  rate  of  value 
added tax, also expressed as a percentage of the weighted average retail selling price, 
even  if  such  an  adjustment  has  the  effect  of  reducing  the  excise  duty  to  below  the 
levels,  expressed  as  a  percentage  of  the  weighted  average  retail  selling  price,  laid 
down in paragraphs 1 and 2 of Article 2 respectively.  

However, the Member State shall raise that duty again so as to reach at least those 
levels  no  later  than  1  January  of  the  second  year  after  that  in  which  the  reduction 
took place.” 

(3) Article 4 is replaced by the following: 

“Article 4 

1. Every four years, the Commission shall submit to the Council a report and, where 
appropriate, a proposal concerning the rates of duty laid down herein and the 
structure  of  excise  duties  as  defined  by  Article  16  of  Council  Directive 
95/59/EC*. 

The report by the Commission shall take into account the proper functioning of 
the  internal  market,  the  real  value  of  the  rates  of  excise  duty  and  the  wider 
objectives of the Treaty.  

2.  The  Member  States  shall  communicate  to  the  Commission  any  available 

information relevant for the report referred to in paragraph 1. 

3.  The  Commission  shall,  in  accordance  with  the  procedure  referred  to  in  Article 
24(2)  of  Council  Directive  92/12/EEC**,  determine  a  list  of  statistical  data 
needed for the report. 

* OJ L 291, 06.12.1995, p.40. 

EN 

13 

   EN 

 
 
** OJ L 76, 23.03.1992, p. 1.” 

Directive 92/80/EEC is amended as follows: 

Article 2 

(1) In Article 3(1) the following eighth to eleventh subparagraphs are added: 

“As  from  1  January  2010,  Member  States  shall  apply  an  excise  duty  on  fine-cut 
smoking  tobacco  intended  for  the  rolling  of  cigarettes  of  at  least  38%  of  the  retail 
selling price inclusive of all taxes, and at least EUR 43 per kilogram.  

As  from  1  January  2014,  Member  States  shall  apply  an  excise  duty  on  fine-cut 
smoking  tobacco  intended  for  the  rolling  of  cigarettes  of  at  least  42%  of  the  retail 
selling price inclusive of all taxes, and at least EUR 60 per kilogram. 

Member  States  shall  gradually  increase  excise  duties  in  order  to  reach  the  new 
minimum requirements referred to in the ninth subparagraph on 1 January 2014. 

As from 1 January 2010, the excise duty expressed as a percentage, as an amount per 
kilogram or for a given number of items shall be at least equivalent to the following: 

(a) in the case of cigars or cigarillos, 5% of the retail selling price inclusive of 

all taxes or EUR 12 per 1 000 items or per kilogram; 

(b)  in  the  case  of  smoking  tobaccos,  other  than  fine-cut  smoking  tobacco 
intended  for  the  rolling  of  cigarettes,  20%  of  the  retail  selling  price 
inclusive of all taxes, or EUR 22 per kilogram." 

(2) Article 4 is replaced by the following:  

“Article 4 

1. Every four years, the Commission shall submit to the Council a report and, where 

appropriate, a proposal concerning the rates of duty laid down herein.  

The report by the Commission shall take into account the proper functioning of the 
internal  market,  the  real  value  of  the  rates  of  excise  duty  and  the  wider 
objectives of the Treaty.  

2.  The  Member  States  shall  communicate  to  the  Commission  any  available 

information relevant for the report. 

3.  The  Commission  shall,  in  accordance  with  the  procedure  referred  to  in  Article 
24(2)  of  Council  Directive  92/12/EEC*,  determine  a  list  of  statistical  data 
needed for the report. 

* OJ L 76, 23. 3. 1992, p. 1.” 

EN 

14 

   EN 

 
(3) Article 5(1) is replaced by the following:  

“1.  The  Commission  shall  publish  once  a  year  the  value  of  the  euro  in  national 

currencies to be applied to the amounts of the excise duty. 

The exchange rates to be applied shall be those obtained on the first working day of 
October and published in the Official Journal of the European Union and shall apply 
from 1 January of the following calendar year.” 

Article 3 

Directive 95/59/EC is amended as follows: 

(1) Article 3 is replaced by the following: 

"Article 3 

The following shall be deemed to be cigars or cigarillos if they can and, given their 
properties and normal consumer expectations, are intended to be smoked as they are: 

(a) rolls of tobacco with an outer wrapper of natural tobacco; 

(b) rolls of tobacco with a threshed blend filler and with an outer wrapper of 
the  normal  colour  of  a  cigar,  of  reconstituted  tobacco,  covering  the 
product in full, including where appropriate the filter but not, in the case 
of  tipped  cigars,  the  tip,  where  the  unit  weight,  not  including  filter  or 
mouth-piece,  is  not  less  than  2.3  g  and  the  circumference  over  at  least 
one third of the length is not less than 34 mm.” 

(2) Article 4(2) is replaced by the following:  

"2.  A  roll  of  tobacco  referred  to  in  paragraph  1  shall,  for  excise  duty  purposes,  be 
considered as two cigarettes where, excluding filter or mouth piece, it is longer than 
9  cm  but  not  longer  than  12  cm,  as  three  cigarettes  where,  excluding  filter  or 
mouthpiece, it is longer than 12 cm but not longer than 15 cm, and so on." 

(3) Article 6 is amended as follows: 

(a) 

(b) 

in  the  first  paragraph  the  term  "1  millimetre"  is  replaced  by  the  term  "1,5 
millimetre"; 

in  the  second  paragraph  the  term  "1  millimetre"  is  replaced  by  the  term  "1,5 
millimetre"; 

(4) Article 7(1) is replaced by the following:  

“1.  Products  which  consist  in  part  of  substances  other  than  tobacco  but  otherwise 

fulfil the criteria set out in Article 3 shall be treated as cigars and cigarillos.” 

(5) Article 16 is replaced by the following: 

EN 

15 

   EN 

 
“Article 16 

1.  The  specific  component  of  the  excise  duty  may  not  be  less  than  10%  and  more 
than 75% of the amount of the total tax burden resulting from the aggregation 
of the following: 

(a) specific excise duty; 

(b) the proportional excise duty and the value added tax levied on the weighted 

average retail selling price . 

The  average  weighted  retail  selling  price  shall  be  determined  at  1  January  of  each 
year, by reference to the year n-1, on the basis of the total releases for consumption, 
and prices including all taxes. 

2. By way of derogation from paragraph 1, 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 10% or above 75% of the total tax burden, the Member State 
concerned  may  refrain  from  adjusting  the  amount  of  the  specific  excise  duty 
until  not  later  than  1  January  of  the  second  year  following  that  in  which  the 
change occurs. 

3.  Notwithstanding  Article  8(1),  each  Member  State  may  exclude  customs  duties 
from the basis for calculating the proportional excise duty on cigarettes. 

4. Member States may levy a minimum excise duty on cigarettes.” 

(6) Article 17 is deleted. 

Article 4  

1. 

Member  States  shall  bring  into  force  the  laws,  regulations  and  administrative 
provisions  necessary  to  comply  with  this  Directive  by  31  December  2009  at  the 
latest. They shall forthwith inform the Commission the text of those provisions and a 
correlation table between those provisions and this Directive. 

When  Member  States  adopt  those  provisions,  they  shall  contain  a  reference  to  this 
Directive  or  be  accompanied  by  such  a  reference  on  the  occasion  of  their  official 
publication. Member States shall determine how such reference is to be made. 

2. 

Member  States  shall  communicate  the  text  of  the  main  provisions  of  national  law 
which they adopt in the field covered by this Directive. 

This  Directive  shall  enter  into  force  on  the  20th  day  following  that  of  its  publication  in  the 
Official Journal of the European Union. 

Article 5 

EN 

16 

   EN 

 
 
This Directive is addressed to the Member States. 

Article 6 

Done at Brussels, 

For the Council 
The President 

EN 

17 

   EN