REPORT FROM THE COMMISSION TO THE COUNCIL on the REFIT evaluation of Directive 2011/64/EU and on the structure and rates of excise duty applied to manufactured tobacco
Date: 2015-12-21
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: EU programme, data collection, evaluation method, excise duty, project evaluation, tax, tobacco, tobacco industry

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 21.12.2015  COM(2015) 621 final   REPORT FROM THE COMMISSION TO THE COUNCIL on the REFIT evaluation of Directive 2011/64/EU and on the structure and rates of excise duty applied to manufactured tobacco  
 
 
TABLE OF CONTENTS 

1. INTRODUCTION ........................................................................................................... 3 

2. BACKGROUND ............................................................................................................. 3 

3. THE EXTERNAL EVALUATION OF THE DIRECTIVE ........................................... 4 

3.1 Scope of the evaluation ......................................................................................... 4 
3.2 Methodology ......................................................................................................... 5 
3.3 Results of the evaluation ....................................................................................... 5 
3.4 Stakeholders feedback on the evaluation .............................................................. 6 

4. ISSUES ARISING FROM THE EVALUATION: DEFINITIONS ............................... 7 

4.1 Functioning of the current definitions ................................................................... 8 
4.1.1 Subjective criteria .................................................................................... 8 
4.1.2 Discrepancies between customs and excise ............................................. 8 
4.1.3 Minimum Excise Duty .............................................................................. 9 
4.2 Absence of definitions ........................................................................................... 9 

5. CONCLUSIONS AND RECOMMENDATIONS OF THE EVALUATION .............. 10 

5.1 Quality of the evaluation ..................................................................................... 10 
5.2 Recommendations ............................................................................................... 11 

6. FOLLOW UP AND FINAL CONCLUSIONS ............................................................. 13 

ANNEX I. TRENDS AND STATISTICS ........................................................................ 15 

ANNEX I.I - WEIGHTED AVERAGE PRICE CIGARETTES .................................................. 17 
ANNEX I.II - TAX BURDEN CIGARETTES ....................................................................... 18 
ANNEX I.III - RELEASES FOR CONSUMPTION CIGARETTES ............................................ 19 
 ANNEX I.IV – PACKS OF CIGARETTES PER ADULT ....................................................... 20 
ANNEX I.V - RELEASES FOR CONSUMPTION FINE CUT TOBACCO .................................. 21 
ANNEX I.VI – FINE CUT TOBACCO PER ADULT ............................................................. 22 
ANNEX I.VII - TAX RECEIPTS ....................................................................................... 23 
ANNEX I.VIII – TOBACCO REVENUE OF TOTAL TAX RECEIPTS ...................................... 24 

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1. INTRODUCTION 
According to Article 19, paragraph 1 of Directive 2011/64/EU1 the Commission is required to 
submit a report on the rates and structure of excise duty laid down in this Directive every four 
years.  This  report  must  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 and must be based 
in  particular  on  the  information  provided  by  Member  States.  The  present  report  is  one  of  a 
series  of  reports2  on  the  functioning  of  EU  rules  on  excise  duties  applied  to  manufactured 
tobacco that the Commission has submitted since 1992.  

Furthermore,  the  Directive  has  been  identified  for  evaluation  under  the  Commission's 
Regulatory Fitness and Performance Programme (REFIT).3  

The current report presents the results and conclusions of an external evaluation assessing the 
Directive  from  these  two  angles.  In  addition,  it  provides  the  overview  of  the  available 
statistics  reported  by  Member  States  concerning  the  development  of  the  Weighted  Average 
Price (WAP), releases for consumption, tax receipts and tax burden on manufactured tobacco 
since the Directive entered into force in 2011.  

Unlike previous reports, the current report does not focus on increases in the minimum rates 
of excise duty prescribed by Directive 2011/64/EU. Many increases in the minimum overall 
excise  duty  have  only  entered  into  force  recently;  some  Member  States  have  been  granted 
transitional  periods  and  some  gradual  increases  must  still  take  effect.4  The  impact  of  these 
measures will, therefore, be examined in a future report.  

2. BACKGROUND 

Directive 2011/64/EU sets  out  EU rules on the structure and rates of excise  duty applied to 
manufactured  tobacco.  In  particular,  it  defines  and  classifies  various  manufactured  tobacco 
products  covered  by  the  Directive  according  to  their  characteristics.  The  structure  of  the 
excise  duties  for  the  different  types  of  products  is  also  established  in  this  Directive.  The 
Directive aims to ensure both the proper functioning of the internal market and, at the same 

1 Council Directive 2011/64/EU of 21 June 2011 on the structure and rates of excise duty applied to 
manufactured tobacco 

2  
COM (1995) 285 
COM (1998) 320 
COM (2001) 133 
COM (2008) 460  
The last report of 2008 resulted in Council Directive 2010/12/EU of 16 February 2010 amending Directives 
92/79/EEC, 92/80/EEC and 95/59/EC on the structure and rates of excise duty applied on manufactured tobacco 
and Directive 2008/118/EC 

3 REFIT is a programme to review the entire stock of EU legislation – to identify burdens, inconsistencies, gaps 
or ineffective measures and to make the necessary proposals to follow up on the findings of the review.  

4 Article 10 and Article 14 of Directive 2011/64/EU. 

3 

 
 
 
 
 
 
                                                            
  
time, a high level of health protection.5 A proper functioning internal market presupposes that 
the  way  in  which  Member  States  tax  the  consumption  of  products  in  this  sector  neither 
distorts  competition  nor  impedes  their  free  movement  within  the  EU.  In  this  context,  the 
Directive  should  ensure  that  manufactured  tobacco  products  are  correctly  taxed  in  the 
Member State of final consumption.6 This is important, given that receipts from excise duties 
on manufactured tobacco contributed overall more than €81 billion to the national budgets of 
Member States in 2014. 

Under the REFIT programme the Commission is committed to ensuring that EU law is fit for 
purpose and achieves its objectives at least cost and burdens. 

3. THE EXTERNAL EVALUATION OF THE DIRECTIVE 

In order to evaluate the functioning of the Directive, the Directorate General for Taxation and 
the  Customs  Union  (DG  TAXUD)  commissioned  an  external  evaluation  (hereafter: 
evaluation)  from  a  consortium  established  by  Ramboll  Management  Consulting  AS,  The 
Evaluation Partnership, and Europe Economics.  

Following  consultation  with  Member  States  and  in  line  with  the  REFIT  programme,  it  was 
agreed  that the objective  of the evaluation should be to  identify possibilities to  improve the 
legislation  in  order  to  reduce  administrative  costs  and  burdens  for  both  national 
administrations and economic operators and to increase the level of compliance and security 
in collecting excise duties on manufactured tobacco. The evaluation started in December 2012 
and was finalised in August 2014. A Steering Group composed of staff from all the relevant 
Commission Services oversaw the execution of the evaluation.  

It  should  be  noted  that,  as  the  evaluation  has  been  finalised  before  the  adoption  of  the  new 
Better Regulation Guidelines on 19 May 20157, some of the compulsory elements introduced 
by  these  guidelines  could  not,  therefore,  be  taken  into  account.  Firstly,  the  evaluation 
collected  stakeholder  views  through  targeted  surveys  rather  than  through  an  open  public 
consultation.  Secondly,  in  line  with  the  objectives  of  the  REFIT  programme,  the  focus  has 
been predominantly on issues related to effectiveness and efficiency.8 

3.1 Scope of the evaluation 

As a first step, the evaluation mapped out the main characteristics of the excise systems for 
manufactured tobacco, with reference to the two principal directives regulating excise duties 

5 Articles 26, Article 113 and Article 168 of the Treaty on the Functioning of the European Union 

6 With exception of the situation as described in Article 32 of Directive 2008/118/EC 

7 http://ec.europa.eu/smart-regulation/guidelines/toc_guide_en.htm 

8 According to the new Better Regulation Guidelines, an evaluation must assess effectiveness, efficiency, 
relevance, coherence and EU added value. 

4 

 
 
 
 
 
 
 
                                                            
on manufactured tobacco.9 The evaluation then focussed on providing answers to the agreed 
evaluation questions. The findings of the evaluation are grouped according to these evaluation 
questions, which are listed in paragraph 3.3. The evaluation also identified issues arising from 
these findings which are considered in Section 4 of this report. 

The impact of minimum rates on the protection of health did not come within the scope of the 
evaluation because many increases in the minimum overall excise duty only entered recently 
into  force,  meaning  that  more  time  is  needed  to  assess  these  aspects.10  In  addition,  several 
Member States have been granted transitional periods lasting until 31 December 2017 to reach 
the  minima  for  cigarettes.  For  fine  cut  smoking  tobacco,  gradual  increases  in  the  minimum 
overall excise duty will take place over a period lasting till 1 January 2020.  

3.2 Methodology 

The evaluation was carried out in  three phases: design, data collection  and analysis. During 
the  data  collection  phase,  questionnaires  were  sent  to  both  Member  States  and  economic 
operators.  27  Member  States  and  48  economic  operators  replied  to  the  questionnaires.  The 
received replies were followed-up by telephone calls and face-to-face interviews. In addition, 
case  studies  were  conducted  in  7  selected  Member  States.11  Desk  research  and  literature 
review  was  also  part  of  this  phase.  Moreover  a  qualitative  analysis  of  existing  legislation, 
studies and economic literature was also carried out, as was an analysis of available economic 
data.  

Based on the responses to the questionnaires, the contractor identified both good practices and 
problems.  In  the  third  phase  the  contractor  analysed  and  compared  the  different  replies  and 
drew  up  a  list  of  problems  faced  by  tax  administrations  and  economic  operators.  Finally,  a 
series of recommendations was drawn up to address the problems identified.  

3.3 Results of the evaluation 

3.3.1 To what  extent do the  current arrangements for excise  duty on tobacco products 
ensure  the  proper  functioning  of  the  Internal  Market  and  avoid  distortions  in 
competition? 

It  was  found  that  implementation  of  the  Minimum  Excise  Duty  (MED)12,  the  inconsistent 
treatment  of  e-cigarettes  and  certain  manufactured  tobacco  products  and  the  tax  induced 

9 Council Directive 2011/64/EU of 21 June 2011 on the structure and rates of excise duty applied to 
manufactured tobacco; Council Directive 2008/118/EC of 16 December 2008 concerning the general 
arrangements for excise duty and repealing Directive 92/12/EEC. 

10 Article 10 and Article 14 of Directive 2011/64/EU. 

11 Germany, Denmark, Finland, Greece, Poland, Romania and United Kingdom. 

12 Article 7, paragraph 4 and Article 8, paragraph 6 of Directive 2011/64/EU 

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substitution between and within product groups creates distortions within the internal market. 
Although,  non-harmonised  anti-forestalling  measures  may  also  negatively  affect  the  proper 
function of the internal market, harmonisation in these areas is considered neither feasible nor 
desirable  by  tax  administrations.  Besides  these  exceptions,  the  evaluation  found  that  the 
current structure and level of rates generally allow for neutral conditions of competition and 
the free setting of prices within the internal market. 

The  impact  of  derogations  and  exceptions  allowed  in  the  current  Directive  on  cross-border 
shopping and illicit trade is limited. Moreover, no clear evidence was found to show that any 
of  the  changes  in  the  tobacco  excise  duty  levels  that  have  entered  into  force  have  led  to 
changes in trade patterns.  

3.3.2 To what extent are the current arrangements for excise duty on tobacco products 
implemented in a cost-effective way? 

In  terms  of  administrative  and  compliance  costs  for  tax  administrations  and  economic 
operators,  the  greatest  negative  impact  is  caused  by  discrepancies  between  the  excise 
definitions and the Combined Nomenclature (CN) classification for customs purposes, and the 
legal  uncertainty  about  the  treatment  of  certain  products  (including  judicial  contestations). 
Even though the costs of legal uncertainty are in general relatively small as it concerns often 
niche  products,  the  impact  on  the  operator  or  tax  administration  has  been  considered  as 
potentially significant. 

3.3.3  To  what  extent  do  the  current  arrangements  of  excise  duty  on  tobacco  products 
safeguard Member States' budgetary objectives? 

In general, the definitions of Article 2 -5 of Directive 2011/64/EU are effective for adequate 
collection of excise duties. In contrast, the definitions are suboptimal for the monitoring of the 
movement and holding of manufactured tobacco.  

3.4 Stakeholders feedback on the evaluation 

The Steering Group overseeing the evaluation invited stakeholders to present their views on 
the findings at a meeting organised in Brussels on 6 June 2014. The invitation was extended 
to  all  relevant  stakeholders,  including  Member  States  authorities,  economic  operators,  and 
health  and  consumer  associations.  Following  the  event,  the  Commission  received  written 
feedback  from  3  Member  States,  12  associations  or  federations  representing  economic 
operators and one network of NGOs working in the field of public health in Europe.  

The  comments  received  were  diverse  in  nature.  In  general,  there  was  more  support  for  the 
findings  of  the  evaluation  than  for  the  recommendations.  In  the  opinion  of  most  of  the 
stakeholders,  the  recommendations  needed  further  analysis.  Apart  from  supporting  some  of 
the findings, many questions were received concerning the methodology and the use of data. 

Concerns  were  expressed  about  overrepresentation  of  some  of  the  stakeholders,  thereby 
affecting the overall dataset. Some had centralised their responses to the questionnaires, while 

6 

 
 
 
 
 
 
 
 
 
 
 
others had asked national branches to answer separately. This was taken into account by the 
external contractor and appropriate adjustments were made.  

Several  critical  comments  were  received  concerning  the  calculation  of  price  elasticity  of 
demand  and  assumptions  of  the  volume  of  illicit  trade  as  well  as  the  choice  to  use 
Euromonitor  data.  The  external  contractor  ensured  that  appropriate  clarification  of  these 
matters was included in the final publication.  

Some felt the evaluation should have also focussed on health aspects of tobacco consumption 
and taxation. However, this was considered premature, as it would have meant taking account 
of  the  impact  of  the  new  Tobacco  Products  Directive  2014/40/EU13  which  must  be 
implemented  by  May  2016.  In  any  event,  the  new  Tobacco  Products  Directive  had  not  yet 
been adopted at the time the core work for the evaluation was carried out.  

In  addition  to  the  feedback  on  the  scope  and  methodology  of  the  evaluation,  feedback 
concerning the recommendations of the evaluation (see also paragraph 5.2) was received: 

  Some respondents were of the opinion that the recommendation to consider aligning 
the  minimum  rates  for  cigars/cigarillos  with  those  of  cigarettes  would  have  a 
disproportional effect.  

  Others were not convinced that including raw tobacco within the scope of the holding 
and  movement  provisions  of  manufactured  tobacco  would  solve  the  problems 
identified.  

  Some  felt  that  it  would  be  inappropriate  to  recommend  eliminating  discrepancies 
between  excise  duty  categories  and  CN  codes  because  the  CN  codes  had  been 
developed for different purposes.  

  Some respondents were of the opinion that e-cigarettes should not be included in the 
scope of the current directive, but that a separate initiative for a harmonised approach 
of taxation of these products should be considered. 

4. ISSUES ARISING FROM THE EVALUATION: DEFINITIONS 

Following  the  entry  into  force  of  Directive  2011/64/EU,  the  definitions  of  cigarettes, 
cigarillos, cigars and smoking tobacco were amended to reflect concerns about deficiencies in 
previous definitions. In the evaluation consideration has been given to the functioning of the 
new definitions. The evaluation identified a number of issues requiring further examination. 
These are listed in the following paragraphs. 

13 Directive 2014/40/EU of the European Parliament and of the Council of 3 April 2014 on the approximation of 
the laws, regulations and administrative provisions of the Member States concerning the manufacture, 
presentation and sale of tobacco and related products and repealing Directive 2001/37/EC. 

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4.1 Functioning of the current definitions 

4.1.1 Subjective criteria 

The current definitions contain a number of subjective expressions. Classification of products 
for  excise  duty  purposes  therefore  requires  a  certain  amount  of  subjective  interpretation. 
Stakeholders  criticised  the  functioning  of  the  current  definitions  and,  in  particular  the 
subjective elements. The difficulties listed below were identified by the evaluation.  

  The  current  formulation  of  Article  5,  in  particular  phrases  such  as  ‘put  up  for  retail 
sale’  and  ‘capable  of  being  smoked  without  further  industrial  processing’  can  cause 
legal uncertainty and differentiated treatment of the same products in Member States. 

  The  definitions  of  cigars,  cigarillos  and  smoking  tobacco  do  not  provide  sufficient 
legal certainty for classification purposes. The inconsistent treatment of manufactured 
tobacco  products  (in  particular  ‘borderline’  products)  can  result  in  different  tax 
situations in each Member State. This might jeopardize the proper functioning of the 
internal  market.  Half  of  the  Member  States  has  experiences  with  products  which,  in 
their opinion, represent an attempt to misuse the current definitions in order to benefit 
from more favourable tax treatment.14 Several economic operators reported that some 
of the smaller cigars or cigarillos benefiting from a lower excise duty rate should be 
considered  as  cigarettes.  In  their  opinion,  these  products  are  direct  substitutes  for 
cigarettes.15 

  The loose formulation of definitions in the Directive or the absence of definitions (see 
paragraph 4.2) causes legal uncertainty. For example, classification of a product that 
does not even involve particularly complex problems can take up between 2-8 hours of 
work  for  operators.16  If  the  classification  does  present  a  problem,  even  more  time  is 
required.  Therefore,  the  impact  of  legal  uncertainty  on  individual  operators  or  tax 
administrations can be significant. 

4.1.2 Discrepancies between customs and excise 

Currently two different systems of classifying products for excise and custom purposes are in 
place. In particular, the definitions set out the Articles 2–5 of Directive 2011/64/EU are not 
fully consistent with the classification system in place for custom purposes. The discrepancies 
lead to higher compliance costs for both tax administrations and economic operators.17 In 
particular, smaller operators have reported problems due to different definitions for excise and 
custom purposes which can lead to increased compliance costs because such operators must 
undertake similar steps twice, under the different systems used by the authorities. In general, 

14 See also p. 57 of the evaluation on tobacco taxation 

15 See also p. 60 of the evaluation on tobacco taxation. 

16 See also p. 163 of the evaluation on tobacco taxation. 

17 See also p. 154 of the evaluation on tobacco taxation. 

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68% of the operators reported that the divergent definitions result in a high increase of 
administrative costs, while 4% even think that the increase is very high.18  

4.1.3 Minimum Excise Duty 

Member States have since 2011 the option to levy a MED on cigarettes. The introduction of 
the  MED  was  supposed  to  provide  Member  States  with  framework  rules  for  setting  this 
minimum amount in the same way. However, the evaluation found that Article 8, paragraph 6 
is  unclear  and  that,  in  practice,  implementation  seems  to  differ  between  Member  States. 
Interviews with Member States show that there is currently a range of interpretations used in 
setting the MED.19  

4.2 Absence of definitions 

Currently Directive 2011/64/EU defines cigarettes, cigarillos, cigars and smoking tobacco.  

Some  undefined  products  could  fall  within  one  of  these  categories  (for  instance  water  pipe 
tobacco). Others might fall outside the scope of the Directive (the latter is in general the case 
for  raw  tobacco,  some  intermediate  products  and  e-cigarettes).  There  are  also  new  heated 
tobacco  products  on  the  market  in  some  Member  States  which  are  creating  differences  in 
treatment.20  These  "heat-not-burn"  tobacco  products  differ  from  e-cigarettes  in  that  they  do 
contain  tobacco.  However,  instead  of  burning  the  tobacco,  a  heating  (as  opposed  to 
combustion) process takes place.  

Some  Member  States  and  economic  operators  reported  that  the  current  definitions  are  no 
longer fit for purpose. This is not only because of market developments, but also because of 
doubts as to whether the current definitions are effective enough to prevent illicit trade. 

While recognising that the task of preventing illicit trade in excise products falls (in particular 
in  terms  of  enforcement)  primarily  under  the  responsibility  of  Member  States,  the 
Commission is, nevertheless, of the opinion that EU rules should be as effective as possible in 
order to combat such trade. The EU has stepped up its efforts in recent years by signing the 
Protocol  to  Eliminate  Illicit  Trade  in  Tobacco  Products,  adopting  the  Tobacco  Products 
Directive containing explicit provisions against illicit trade and the action programme set out 
in the Commission Communication of 6 June 2013.21 The amount of duty lost to illicit trade is 

18 See also p. 166 of the evaluation on tobacco taxation. 

19 See table 12 of the evaluation on tobacco taxation. 

20 The 'heat-not-burn' products were not covered by the evaluation. In the Fiscalis Project Group on Tobacco 
(FPG 050) and during meetings of the Indirect Tax Expert Group (ITEG) the first discussions concerning the tax 
treatment of these products took place. 

21 COM (2013) 324, Communication from the Commission to the Council and the European Parliament, 
Stepping up the fight against cigarette smuggling and other forms of illicit trade in tobacco products - A 
comprehensive EU Strategy. 

9 

 
 
 
 
 
 
 
                                                            
estimated  in  the  evaluation  at  around  €11.1  billion  annually.22According  to  the  estimations 
produced  by  the  external  contractor,  the  reduction  in  illicit  trade  could  lead  to  the  potential 
recovery of duty in the range of €6.1 billion to €7.2 billion per annum, after adjusting for a 
price-induced reduction in the level of consumption (estimated on basis of the average price 
elasticity of a given market).23  

Other issues identified were the following:  

  The definitions do not allow correct and full use of either the Excise Movement and 
Control System (EMCS) or the relevant provisions on administrative cooperation and 
exchange  of  information,  all  of  which  are  considered  as  key  elements  in  the  fight 
against  fraud.  This  is  caused,  in  particular,  by  the  limited  scope  of  Directive 
2011/64/EU  whereby  certain  products  (such  as  raw  tobacco)  are  excluded.  Several 
Member States mentioned that a growing amount of raw tobacco was being diverted 
from legal to illegal trade circuits or sold directly to end-consumers. 

  The  inconsistent  treatment  of  a  number  of  products  (e.g.  intermediary  products,  raw 
tobacco and by-products)  across Member States  plays a role in the limited ability of 
Member State authorities to monitor manufactured tobacco. 

  The ‘catch all’ approach contained in the definitions laid down in Article 5 leads to a 
relative  higher  taxation  of  products  with  different  characteristics,  such  as  water  pipe 
tobacco, compared to the other products in this category. 

  Excluding  e-cigarettes  from  the  scope  of  excisable  products  might  have  significant 
long  term  budgetary  implications  for  Member  States.  Some  Member  States  have 
begun  to  levy  a  national  tax  on  these  products.  This  might  in  time  jeopardize  the 
proper functioning of the internal market if other Member States decide to do likewise 
in an uncoordinated way which would result in differentiated treatment across the EU. 

5. CONCLUSIONS AND RECOMMENDATIONS OF THE EVALUATION  

5.1 Quality of the evaluation 

The Commission has carefully examined the external evaluation and has also taken account of 
the  feedback  received  from  stakeholders.  The  work  carried  out  by  the  evaluation  team  was 
judged  to  be  in  accordance  with  the  evaluation  standards  of  the  Commission.24  The 

22 According to the estimates of the European Anti-Fraud Office (OLAF) the illicit trade in cigarettes causes 
annual financial losses of over EUR 10 billion in the budgets of the European Union and its Member States, see 
also COM (2013) 324. 

23 See also p. 46 of the evaluation on tobacco taxation 

24 http://ec.europa.eu/smart-regulation/evaluation/docs/standards_c_2002_5267_final_en.pdf  

10 

 
 
 
 
 
 
 
 
 
                                                            
 
judgements  and  conclusions  in  the  evaluation  were  derived  directly  from  findings  based  on 
the evidence collected. To ensure the robustness of the findings, the evaluation used several 
data  collection  methods,  including  surveys,  interviews,  desk  research  and  case  studies.  This 
methodological mix was overall considered as sufficient by the Commission and stakeholders.  

However, the Commission is aware that some assumptions had, inevitably, to be made due to 
a lack of data or information in order to answer the evaluation questions. Some findings lack 
information  on  costs  and  benefits,  for  instance  concerning  dual  classification  and  the 
monitoring of raw tobacco. Also, as the focus of the evaluation has been on effectiveness and 
efficiency,  issues  related  to  relevance,  coherence  and  EU  added  value  have  not  been 
addressed in detail. Finally, the evaluation does not capture the potential impacts of the new 
Tobacco Products Directive 2014/40/EU, which is also expected to have an effect on tobacco 
consumption.25  

5.2 Recommendations 

On the basis of the evidence gathered, the evaluators put forward 16 recommendations with 
the  view  to  improving  the  functioning  of  the  regulation  concerning  excise  duty  on 
manufactured tobacco. 
Table 1 – External evaluation recommendations26 

No 
         Recommendations related to definitions of excisable tobacco products 

Recommendation 

1 

2 

3 

4 

5 

6 

Further  analyse  the  possibility  of  including  e-cigarettes  in  the  scope  of  excise  duty  on tobacco 
products. 
Further  analyse  (with  careful  consideration  to  costs  and  burden  involved)  the  possibility  of 
introducing  raw  tobacco  within  the  scope  of  monitoring  of  excisable  tobacco  products  and/or 
alternative solutions to ensure the systematic monitoring of the logistics of raw tobacco. 
Art 4(1) (a) should be brought in line with the Explanatory Notes to the Combined nomenclature 
(CNEN) of 2402 10 00. 
Art  5(1)  (a)  “capable  of  being  smoked  without  further  industrial  processing”  to  be  revised  in 
order to reduce uncertainty related to the treatment of partially processed tobacco put up for sale 
with the intention of being smoked (e.g. “without further processing in a tax warehouse”). 
In  light  of  the  different  characteristics  of  water-pipe-tobacco,  a  distinct  tax  category  should  be 
developed, allowing the imposition of an appropriate rate structure. 
Art 5(1) (b)  “put up for retail sale  and which can be smoked”, should  be revised by removing 
wording “retail” from the definition, the CN code should be subsequently brought in line. 

7  Further analyse the possibility to afford expanded tobacco a distinct CN code. 

8 

In  order  to  remove  inconsistencies  and  legal  uncertainty  in  treatment,  further  analyse  the 
possibility  to  include  an  additional  tax  category  within  the  scope  of  the  Directive  which  is  to 
include  intermediary  products  whose  monitoring  under  the  EMCS  is  necessary,  this  category 

25 Please note that Member States are required to bring into force the laws, regulations and administrative 
provisions necessary to comply with this Directive by 20 May 2016. 

26 Source: Final report evaluation "Study on the measuring and reducing of administrative costs for economic 
operators and tax authorities and obtaining in parallel a higher level of compliance and security in imposing 
excise duties on tobacco products"  

11 

 
 
 
 
                                                            
 
No 

9 

10 

Recommendation 
may make reference direct reference to applicable CN codes (e.g. reconstituted tobacco; tobacco 
refuse not suitable for smoking, expanded tobacco, etc.). 
Aim to eliminate inconsistencies between CN codes and Excise duty categories, prioritising the 
need for non-excisable products to share the same CN classification as excisable products and for 
products  within  the  same  tariff  classification  to  be  potentially  classified  in  multiple  excise 
categories. 
Art 4 (1) “given their properties and normal consumer expectations is exclusively intended to be 
smoked  as  it  is”  should  be  revised  to  ensure  legal  clarity  and  eliminate  legal  uncertainty  and 
costly disputes. 

        Recommendations related to rates and structure of the excise duty 

11 

12 

Consider  the  possibility  of  aligning  minimum  excise  taxes  on  cigars  /  cigarillos  with  those  of 
cigarettes  in  order  to  eliminate  the  incentive  to  market  “borderline”  products  which  might 
attempt to circumvent payment of the higher excise duty. 
Revise Art 7 (4) and Art 8 (6) to remove the uncertainty with respect to the limits imposed on the 
MED.  

        Recommendations related to other topics analysed in the context of this evaluation 

13 

14 

A  correction  message  for  the  e-AD  should  be  introduced  in  order  to  correct  minor  mistakes; 
however, it should not be possible to change essential data like the quantity, the EPC, the CN-
code, etc.  
Consider  integrating  national  EMCS  systems  in  the  context  of  market  surveillance  and  for  the 
purposes of criminal investigations. 

15  Transit countries should electronically be informed of movements taking place on their territory. 
16  Consider developing and recommending a uniform risk analysis tool to be used at EU level. 

The Commission has examined the relevance of each of the recommendations and finds the 
following to be worthy of further consideration: 

  Recommendations  4,  6,  10  and  12  suggest  creating  more  accurate  definitions  in  order  to 
reduce legal uncertainty, avoid different approaches in Member States and distortion of the 
internal  market.  Addressing  these  recommendations  would  have  an  impact  on  the  work 
parameters of other recommendations and could take priority. 

  The aim of recommendations 3 and 9 is to simplify the current structure by adjusting the 
categories or definitions of manufactured tobacco in the excise legislation to take account 
of  the  classification  for  custom  purposes  and  the  corresponding  Explanatory  notes  to  the 
CN. 

  Recommendations  1,  2,  5  and  8  concern  the  possible  introduction  of  new  product 
categories in order to facilitate an appropriate, equal taxation treatment of (new) products 
within the internal market and allow Member States to monitor and control sufficiently. 

  Recommendation  11  is  designed  to  reduce  circumvention.  In  this  context,  it  should  be 
taken into account that derogations from the definition of cigars and cigarillos granted to 
Germany and Hungary, ended on 31 December 2014.27 Furthermore, the current Directive 

25 Article 4, paragraph 2 of Directive 2011/64/EU 

12 

 
 
 
 
 
 
                                                            
empowers the Member States to tackle the circumvention by increasing the excise duty on 
cigars only.  

The other recommendations are considered to either fall outside the scope of possible revision 
of Council Directive 2011/64/EU or to be only indirectly linked to it. These include: 

  Recommendations  7  and,  in  part,  6  and  9  relate  to  customs  classification  and  the 
corresponding CN codes. The CN is based on the Harmonized System (HS) nomenclature 
with further Community subdivisions. The Harmonized System is managed by the World 
Customs Organisation (WCO). These recommendations do therefore not come within the 
scope of Council Directive 2011/64/EU. However, it might be possible to use the customs 
classification system as a blueprint for the definitions of manufactured tobacco products in 
order  to  decrease  legal  uncertainty.  This  could  also  generate  potential  cost  reducing 
synergies, which the Commission Services will assess. 

  Recommendations 13 to 16 contain adjustments aimed at improving the overall system of 
excise  duty  collection  in  Member  States.  Consequently,  these  recommendations  are 
considered to be more relevant to the parallel and on-going evaluation of Council Directive 
2008/118/EC  of  16  December  2008  concerning  the  general  arrangements  for  excise  duty 
and repealing Directive 92/12/EEC. The evaluation process of this Directive was started in 
2014 and is expected to be completed by 2016. 

6. FOLLOW UP AND FINAL CONCLUSIONS 

Levying  taxes  on  the  consumption  of  products,  such  as  excise  duties  on  manufactured 
tobacco, should neither distort competition nor hinder the possibility for goods to move freely 
within the EU in a proper functioning internal market. As part of the REFIT programme, this 
evaluation has particularly examined questions of efficiency, effectiveness and administrative 
burden  arising  from  Directive  2011/64/EU  in  order  to  ensure  that  EU  legislation  on  excise 
duties on manufactured tobacco achieves its policy objectives at least cost. 

Overall, the evaluation found that the current structure and level of rates generally allow for 
neutral conditions of competition and the free setting of prices within the internal market. At 
the same time, the evaluation findings show that some distortions within the internal market 
are created through  differentiated application of the MED28, the  inconsistent treatment of e-
cigarettes  and  certain  manufactured  tobacco  products  and  the  tax  induced  substitution 
between and within product groups.  

Within  the  REFIT  context,  the  evaluation  identifies  unnecessary  administrative  and 
compliance  costs  for  tax  administrations  and  economic  operators.  These  costs  result  from 
certain definitions which can lead to legal uncertainty over the treatment of specific products. 
In addition, the application of different definitions of tobacco products for excise duty and for 
customs  purposes  has  been  found  to  be  problematic,  in  particularly  for  Small  and  Medium 
Enterprises as it translates into double entries and legal uncertainty. 

28 Article 7, paragraph 4 and Article 8, paragraph 6 of Directive 2011/64/EU 

13 

 
 
 
 
 
 
                                                            
Finally,  with  certain  exceptions,  the  Directive  has  proven  to  be  effective  and  generally 
appropriate  for  enabling  adequate  collection  of  excise  duties  for  the  large  majority  of 
manufactured tobacco products. 

In the view of the findings of the evaluation, the Commission will consider the next steps in 
discussions with Member State experts.29 These steps could also include a revision of the 
Directive. Such a revision would involve carrying out a public consultation and an Impact 
Assessment to gather further evidence, including where possible, quantified estimates on the 
impacts and proportionality of possible solutions to the problems identified.  

In  addition  to  giving  consideration  to  the  specific  recommendations  of  the  evaluation,  the 
Commission  will,  in  the  light  of  the  findings  of  the  evaluation,  also  examine  how  to  best 
achieve the following objectives: 

  A uniform understanding of application of the MED; 

  Limiting  tax  induced  substitution  within  and  between  product  categories  where 

possible; 

  Providing  clarity  as  regards  the  harmonized  definitions  and  the  treatment  of  novel 

products, in order to:  

  support  consistent  treatment  and  legal  clarity  on  classifying  excise  products 

within the EU and; 

  allow Member States to monitor the movement and production effectively 
  Avoid unnecessary administrative costs. 

In  deciding  on  next  steps,  the  Commission  will  also  give  due  consideration  to  any  relevant 
recommendations made by the Council or European Parliament. 

29 As a first step, the Commission has been discussing the recommendations in the Fiscalis Project Group on 
Tobacco (FPG 050) during 2015 and will continue in 2016 in order to take the opinions and experiences from 
experts of Member States into account. A particular focus is given to recommendations 1 and 2 (the inclusion of 
other products such as raw tobacco and e-cigarettes within the scope of excisable goods).  

14 

 
 
 
 
 
 
 
 
 
 
 
                                                            
ANNEX I. TRENDS AND STATISTICS  

Following the most recent revision in 2011 of the  legislation on excise duty on tobacco, the 
excise duty rates on manufactured tobacco were amended. The minimum rates required were 
increased. For fine-cut smoking tobacco, future gradual increases were also included. Member 
States were allowed more flexibility in regard to the application of the specific component of 
the excise duty on cigarettes, the bandwidth of the specific component was increased from 5 - 
55% to 7.5 – 76.5% of the total tax burden. In addition, the possibility to create a tax floor for 
cigarettes by levying a MED was also introduced.  

In  accordance  with  Article  19,  paragraph  3  of  Directive  2011/64/EU  and  the  Commission 
implementing decision 2011/480/EU30, Member States are required to provide information on 
an annual basis to the Commission: 

  Excise duty rates; 
  Weighted Average retail selling Price (WAP); 
  Tax receipts and; 
  Releases for consumption of manufactured tobacco.  

The information provided to date by Member States in this respect has shown the following. 

Weighted Average Price 
With the entry into force of Directive 2011/64/EU the most popular price category (MPPC) 
was abolished and replaced by the WAP. Following the introduction of the WAP, the basis for 
calculating the minimum rates of excise duty for cigarettes and fine-cut smoking tobacco also 
changed. Annex I.I shows the development of the WAP for cigarettes in each Member State 
from  2012  to  2015.  It  should  be  noted  that  the WAP  for  2012  for  instance,  is  based  on  the 
average  prices  of  all  cigarettes  released  for  consumption  during  the  previous  year.  In  all 
Member  States,  except  Malta,  the  average  price  of  cigarettes  released  for  consumption  in 
2014  increased  compared  to  2011. These  increases  can  be due  to  several  reasons,  including 
increase in taxation, which may also influence the price. The drivers behind tax increases can 
also  differ:  taxes  may  be  increased  to  raise  revenue,  for  health  policy  reasons  or  to  comply 
with the European minimum requirements31. 

Tax burden  
Since the WAP was introduced, Member States must report their tax burden as percentage of 
the WAP (based on the average price of the products released for consumption in the previous 
year). As can be seen in Annex I.II, the tax burden (incl. VAT) on cigarettes in every Member 
State fluctuates from one year to the next. If the WAP increases, the tax burden will decrease 
if rates remain unchanged. Overall, the figures show that the tax burden on cigarettes in the 

30 Commission Implementing Decision of 28 July 2011 concerning the list of statistical data on the structure and 
rates of excise duty applied on manufactured tobacco to be provided by the Member States pursuant to Council 
Directives 92/79/EEC and 92/80/EEC (2011/480/EU). 

31 Europe Economics has also analysed the development of the average cigarette prices based on the available 
Euromonitor data between 2007 and 2012 in Member States, this is published in figure 35 of the evaluation on 
tobacco taxation. 

15 

 
 
 
 
 
 
 
                                                            
EU  in  2015  varied  from  just  below  70%  in  Luxemburg  and  Latvia  to  85%  in  the  United 
Kingdom. This figure gives, however, no indication of the amount of tax32, as the tax burden 
is expressed in a percentage of the WAP, which is different in each Member State.33 

Releases for consumption and tax receipts  
The amount of cigarettes released for consumption declined in most Member States, while the 
amount of fine-cut tobacco released for consumption fluctuated over the period 2011-2014.34 
The  decline  of  cigarettes  released  for  consumption  may  have  happened  for  several  reasons, 
for  instance  advertising  bans,  anti-smoking  campaigns,  smoking  bans  in  public  places, 
tobacco taxes and consumption of other tobacco products or the arrival of alternative products 
on  the  market  such  as  e-cigarettes  or  Nicotine  Replacement  Therapy.  Annex  I.IV  and  I.VI 
show  the  packages  of  cigarettes  and  grams  of  fine  cut  tobacco  released  for  consumption 
related  to  the  population  in  each  Member  State.  This  is  no  indication  of  the  percentage  of 
smokers in a Member State, because manufactured tobacco released for consumption in one 
Member State might also be consumed by citizens of other Member States.35  

The highest amount of revenues from excise duties corresponds to those Member States with 
the highest population.36 Which part of the total tax receipts consists of revenue from excise 
duties on manufactured tobacco differs between Member States.37 

32 The full list of excise duty rates in each Member State is available in the Excise Duty Tables for Manufactured 
Tobacco; 

33 Europe Economics analysis of the amount of tax per cigarettes (including VAT), is represented in figure 23 of 
the evaluation on tobacco taxation. 

34 See Annex I.III and I.V 

35 Excise duty is only due in the Member State of purchase if the requirements of Article 32 of Directive 
2008/118/EC are met. 

36 See Annex I.VII 

37 Europe Economics has analysed the data published by DG TAXUD on the revenue of taxes on consumption of 
manufactured tobacco between 2008 and 2012. The results of this analysis can be found in figures 3 to 11 of the 
evaluation on tobacco taxation. 

16 

 
 
 
 
                                                            
ANNEX I.I - WEIGHTED AVERAGE PRICE CIGARETTES  

17 

 
 
ANNEX I.II - TAX BURDEN CIGARETTES  

18 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ANNEX I.III - RELEASES FOR CONSUMPTION CIGARETTES 

19 

 
 
 
 ANNEX I.IV – PACKS OF CIGARETTES PER ADULT 

20 

 
 
ANNEX I.V - RELEASES FOR CONSUMPTION FINE CUT TOBACCO 

21 

 
 
 
ANNEX I.VI – FINE CUT TOBACCO PER ADULT 

22 

 
 
ANNEX I.VII - TAX RECEIPTS  

23 

 
 
 
ANNEX I.VIII – TOBACCO REVENUE OF TOTAL TAX RECEIPTS 

24