COMMISSION STAFF WORKING DOCUMENT EVALUATION of the Council Directive 2011/64/EU of 21 June 2011 on the structure and rates of excise duty applied to manufactured tobacco
Date: 2020-02-10
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: excise duty, illicit trade, public health, single market, smoking, tax authorities, tax law, tax offence, tobacco, tobacco industry

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 10.2.2020  SWD(2020) 32 final  COMMISSION STAFF WORKING DOCUMENT  EVALUATION of the Council Directive 2011/64/EU of 21 June 2011 on the structure and rates of excise duty applied to manufactured tobacco {SWD(2020) 33 final}  
 
 
Table of Contents 

1. 

INTRODUCTION ....................................................................................................... 4 

1.1.  Purpose................................................................................................................. 5 

1.2.  Scope .................................................................................................................... 6 

2.  BACKGROUND TO THE INTERVENTION ........................................................... 7 

2.1.  Description of the intervention and its objectives ............................................... 7 

2.2.  Baseline and points of comparison .................................................................... 10 

3. 

IMPLEMENTATION / STATE OF PLAY .............................................................. 10 

3.1.  Description of the current situation ................................................................... 10 

3. 2 State of play ........................................................................................................... 11 

4.  METHOD .................................................................................................................. 17 

4.1.  Short description of methodology...................................................................... 17 

4.2.  Limitations and robustness of findings .............................................................. 17 

5.  ANALYSIS AND ANSWERS TO THE EVALUATION QUESTIONS ................ 18 

5.1.  Effectiveness ...................................................................................................... 18 

5.2.  Efficiency ........................................................................................................... 37 

5.3.  Coherence .......................................................................................................... 44 

5.4.  Relevance ........................................................................................................... 50 

5.5.  EU added value .................................................................................................. 52 

6.  CONCLUSIONS ....................................................................................................... 55 

ANNEX 1: PROCEDURAL INFORMATION ................................................................ 58 

ANNEX 2: STAKEHOLDER CONSULTATION ........................................................... 59 

ANNEX 3: METHODS AND ANALYTICAL MODELS ............................................... 67 

ANNEX 4: TAX STRUCTURES AND MINIMUM RATES .......................................... 72 

ANNEX  5:  MAIN  CJEU  RULINGS  ON  THE  INTERPRETATION  AND 

IMPLEMENTATION OF THE DIRECTIVE .......................................................... 74 

ANNEX  6:  MAIN  FINDINGS  FROM  PREVIOUS  EVALUATIONS  OF 

DIRECTIVE 2011/64/EU ......................................................................................... 75 

1 

 
 
 
 
 
 
Term or acronym 

Ad valorem 

CJEU 

CN 

DG TAXUD 

E-cigarettes 

EMCS 

FCT 

FCTC 

HTP 

Horizontal Directive 

JRC 

MED 

OLAF 

OST 

Glossary 

Meaning or definition 
Duties levied on the maximum retail price of products and 
expressed as a percentage of it. 
Court of Justice of the European Union 

Combined Nomenclature 

Directorate-General for Taxation and the Customs Union 
A product that can be used for consumption of nicotine-
containing vapour via a mouth piece, or any component of 
that product, including a cartridge, a tank and the device 
without cartridge or tank. Electronic cigarettes can be 
disposable or refillable by means of a refill container and a 
tank, or rechargeable with single-use cartridges. (see art 20 
of Directive 2014/40) 
Excise Movement Control System 

Fine-cut tobacco 

WHO Framework Convention on Tobacco Control  

Heated Tobacco Products 
Council Directive 2008/118/EC 

Joint Research Centre 
Minimum Excise Duty Minimum amount of excise duty 
(per quantity of product) that Member States can levy on 
certain tobacco products when the sum of specific and ad-
valorem duties falls below an established threshold. 

The European Anti-Fraud Office 

Other smoking tobacco 

Price elasticity of the 
demand 

Protocol 

RfC - Releases for 
consumption 

Specific Excise duty 

The study or EA 2019 

The tobacco tax 
Directive or the 

It is a measure of the change in the quantity demanded or 
purchased of a product in relation to its price change. A 
price elasticity of e.g. -0.5 means that if price changes by 
10% the quantity demanded reduces by 5%. 
WHO Protocol to eliminate Illicit Trade in Tobacco 
products 
The condition where excise goods are not under duty 
suspension arrangements and are therefore subject to the 
charging of the excise duty. 
Duties levied on the quantity of product and expressed as 
monetary sum per unit (i.e. per 1000 units, per Kg). 
“Study on Council Directive 2011/64/EU on the structure 
and rates of excise duty applied to manufactured tobacco, 
Economisti Associati, 2019”  

Council Directive 2011/64/EU 

2 

 
 
Directive 

TFEU 

TPD 

Total Tax Burden 

Track & trace 

WAP -Weighted 
Average Price 

WHO  
WHO FCTC 

Treaty on the Functioning of the EU 

Tobacco Product Directive 
The sum of the ad valorem and specific excise duty plus 
the value-added tax. 
EU traceability system  applying to tobacco products as put 
in place by the Tobacco Product Directive 
The weighted average retail selling price is calculated as 
the ratio between the monetary value of all products 
released for consumption, based on the retail selling price, 
divided by the total quantity released for consumption.  
World Health Organization 
WHO Framework Convention for Tobacco Control 

3 

 
 
 
 
1.  Introduction 

Excise duties are indirect taxes on the sale and use of specific products. Union legislation 
lays down harmonised rules for excise duties on alcohol, tobacco and energy, as well as 
common  provisions.  Such  legislation  is  aimed  at  ensuring  that  excise  duties  are 
coherently applied throughout the Union.  

Council Directive 2011/64/EU1 (hereafter ‘the tobacco tax Directive’ or ‘the Directive’), 
lays down the EU rules for the taxation of manufactured tobacco products. The tobacco 
tax Directive aims  at  ensuring the proper  functioning of the internal  market  and,  at  the 
same time, a high level of health protection.  

The  Directive  is  part  of  a  broader  EU  policy  framework  that  includes  the    common 
provisions applicable to all products subject to excise duties set out in Council Directive 
2008/118/EC2 (also known as ‘the Horizontal Directive’), the customs union legislation, 
as  well  as  key  policies  such  as  tobacco  control  policies3  and  the  policies  against  illicit 
trade and tax fraud4.  

Furthermore, the  EU is  party to the WHO  Framework Convention on Tobacco Control 
(FCTC)5 which in particular addresses tax and price measures to reduce the demand for 
tobacco products6. The EU is also party to the Protocol against Illicit Trade7.   

The Directive identifies the tobacco products subject to the harmonised rules for excise 
duties  and  sets  minimum  levels  of  taxation  (specified  in  Annex  4).  In  this  context,  the 
Member  States  are  free  to  apply  excise  duty  rates  above  these  minimum  levels  of 
taxation  according  to  their  own  national  needs.  All  revenue  from  excise  duties  goes 
entirely to the Member States.  

The Horizontal Directive should ensure that manufactured tobacco products are correctly 
taxed  in  the  Member  State  of  release  for  consumption  (an  exception  to  this  general 
principle is foreseen in the event of acquisition by a private individual for his own use8).  
This is important, given that receipts from excise duties on manufactured tobacco  

1  Council  Directive  2011/  64/EU  of  21  June  2011  on  the  structure  and  rates  of  excise  duty  applied  to 
manufactured tobacco (OJ L 176, 5.7.2011, p. 24–36). The Directive entered into force as of 1 January 
2011  

2 Council Directive 2008/118/EC of 16 December 2008 concerning the general arrangements for excise 
duty and repealing Directive 92/12/EEC (OJ L 9, 14.1.2009, p. 12). 
3 Directive 2014/40/EU 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 

4 2nd Action Plan to fight the illicit tobacco trade 2018-2022 - COM/2018/846 final 
5 https://www.who.int/fctc 
6 https://www.who.int/tobacco/control/measures_art_6/en/ 
7 The Protocol entered into force on 25 September 2018 
8 Article 32 of Council Directive 2008/118/EC 

4 

 
 
 
                                                           
contributed overall more than EUR 82.3 billion to the national budgets of Member States 
in 2017.  

The Directive provisions are essentially of four kinds: 

1. 
Provisions aimed at defining the different manufactured tobacco products that are 
subject to a harmonised treatment: cigarettes; cigars and cigarillos; and smoking tobacco 
(consisting of fine-cut tobacco for the rolling of cigarettes and ‘other smoking tobacco’, 
which includes e.g. pipe tobacco and water-pipe tobacco). 

2. 
Provisions on the tax structures applicable to the various products defined, i.e. the 
ad valorem component, the specific component (per quantity or per weight), and the rules 
and limits for the application of a mixed structure, where required. It also lays down the 
rules for applying an optional minimum excise duty (MED) on certain products. 

3. 
Provisions on the rates applicable to the different product  categories, setting the 
minimum  amounts  of  the  excise  duty  applicable.  It  includes  also  the  mechanism  to 
calculate  the  weighted  average  retail  selling  price  (WAP)  for  cigarettes  and  fine-cut 
tobacco.  

4. 

Exemptions and derogations for certain countries or territories. 

Finally,  new  tobacco  products  such  as  heated  tobacco  and  electronic  cigarettes  (e-
cigarettes)  are  not  explicitly  covered  by  the  Directive  currently.  Although  no  separate 
category is provided for them, some of these products could be covered by the Directive 
to  the  extent  that  they  meet  the  requirements  of  one  of  the  manufactured  tobacco 
products as currently defined. 

1.1. 

  Purpose 

The evaluation9  looks at the implementation of the different provisions of the Directive, 
and assesses its application by the Member States. In particular, this evaluation analyses 
the  effect  of  the  minimum  rates  and  structures  of  excise  duty  applied  on  manufactured 
tobacco. The evaluation assesses to which extent these provisions have contributed to: 

  ensuring the proper functioning of the internal market; 

  providing  a high level of health protection and 

 

fighting against tax fraud, tax evasion and illegal cross border shopping. 

This  evaluation  also  covers  the  outstanding  issues  identified  in  the  2018  Commission 
Report10.  That  report  presented  the  results  and  conclusions  of  an  external  study  on  this 
subject and set out the reasons why the Commission decided to not submit a proposal for  

9 See Evaluation Tobacco Excise Directive Roadmap,  published on 06/02/2018 
10 See Commission report COM (2018)17 final 

5 

 
 
 
 
                                                           
revision of Directive 2011/64/EU at that moment in time. One of the aspects examined 
by  the  report  and  the  study  was  the  tax  treatment  of  novel  products  such  as  electronic 
cigarettes  at  EU  level.  As  these  markets  were  only  emerging  and  rapidly  evolving, 
sufficient data were not available to support a final position at the time when the report 
was  issued.  The  purpose  of  this  evaluation  is  to  fill  the  information  gaps  in  order  to 
assess the correct harmonised approach for the taxation of those products. 

This  evaluation  assesses  the  performance  of  the  Directive  against  the  basic  evaluation 
criteria  of  effectiveness,  efficiency,  relevance,  coherence  and  EU  added  value,  in  line 
with the Better Regulation Guidelines11. 

Therefore,  the  purpose  of  this  evaluation  is  twofold.  Firstly,  it  will  assess  whether  the 
Directive  has  met  its  dual  objective,  which  is  to  ensure  the  proper  functioning  of  the 
internal market and, at the same time, ensure a high level of health protection, and further 
assess its contribution to other EU policies such as tobacco control and the fight against 
illicit trade. Secondly, this evaluation  will assess whether new concerns  and challenges 
have arisen since its adoption. 

This evaluation will help to determine whether any subsequent policy action is needed in 
order to address the identified shortcomings and recent market developments. 

1.1. 

  Scope 

The  evaluation  takes  into  account  the  Directive’s  objectives,  all  provisions  of  the 
Directive and the relevant case law from the Court of Justice of the European Union. The 
time  period  covered  is  from  the  adoption  of  the  Directive  until  the  availability  of  the 
latest reported data (2011 to 2017).  

The  evaluation  focuses  on  obtaining  an  overview  of  the  EU  and  the  geographical 
coverage is all 28 Member States. 

This  report  is  based  in  particular  on  a  comprehensive  external  study  for  an  ex-post 
evaluation  of  the  tobacco  tax  Directive  (hereafter  ‘the  study’)  with  the  majority  of  the 
tasks  carried  out  in  2018  and  which  concluded  in  January  201912.  This  study  notably 
builds  on  a  public  stakeholders'  consultation  carried  out  between  23  May  2018  and  3 
September 2018 as well as numerous stakeholders' consultation activities and extensive 
desk research. 

11 Better Regulation Guidelines 
12 Study on Council Directive 2011/64/EU on the structure and rates of excise duty applied to manufactured 

tobacco, Economisti Associati, 2019 

6 

 
 
 
                                                           
2.  Background to the intervention 

2.1.  Description of the intervention and its objectives 

Council  Directive  2011/64/EU  codifies  the  previous  common  fiscal  legislation  on 
manufactured  tobacco  in  the  EU  in  a  single  act,  and  most  notably  the  revisions  by 
Council Directive 2010/12/EU13. The 2010 Directive was adopted in order to achieve a 
dual overarching goal14: to ensure the functioning of the internal market and a high level 
of human health protection.  This dual role putting the two objectives at the same level is 
therefore central to the Directive.  

The specific objectives are more directly connected with the mechanisms and tools of the 
tobacco  excise  legislation  taken  over  from  the  previous  tobacco  tax  Directive  and 
codified into the Directive. These specific objectives are to: 

(i)  Support  EU  market  integration  (i.e.  avoid  partitioning  of  geographical  market) 

and removal of obstacles and barriers to it (recital 3).  

(ii) Avoid tax-induced competition distortions, both cross-country (between low- and 
high-taxing  countries)  and  cross-product  (between  products  subject  to  different 
levels of taxation) (recital 9). 

(iii) Ensure  freely-formed  prices  for  all  groups  of  manufactured  tobacco  in  all 

geographical markets (recital 10). 

(iv)  Pre-empt fraud and smuggling (tax avoidance, circumvention and ‘abuse’ of tax 

categories) (recital 15). 

(v) Deter consumption through taxation and reduce access to ‘less-taxed’ alternatives 

(recital 16).  

(vi)  Ensure a proper functioning of the excise duty system.15 

The reconstructed intervention logic underpinning the evaluation is presented below. It is 
mainly  based  on  the  recitals  of  the  Directive  and  the  analysis  of  the  accompanying 
documentation at the time of the preparation and negotiations of the Directive (especially 
the 2008 impact assessment report16).  

The starting point are the problems that were identified in 2008 during the preparation of 
the  Directive  (see  figure  1,  the  orange  frame).  The  activities/actions  presented  in  the 
intervention logic are essentially the Directive provisions, which are of three main types: 
(i)  the  adoption  of  common  product  definitions,  tax  categories  and  procedures;  (ii)  the 

13  In  particular,  Directives  92/79/EEC,  92/80/EEC,  95/59/EC  on  the  structure  and  rates  of  excise  duty 
applied on manufactured tobacco and subsequent amendments of Council Directive 2010/12/EU. 
14 Recital 2: “in order to ensure the proper functioning of the internal market, and, at the same time, a high 

level of public protection” 

15 The text of Directive 2011/64/EU does not mention among its objectives the proper functioning of the 
excise system, which is the subject of Directive 2008/118/EC (the ‘Horizontal’ Directive), but it seems 
implicit  that  the  rules  and  provisions  of  Directive  2011/64/EU  should  also  ensure  effective  and 
efficient administration of excise duty on tobacco and collection of tax receipts. 

16 See impact assessment report SEC(2008)2266.  

7 

 
                                                           
harmonisation  of  the  excise  duty  structures  for  the  different  categories  of  products  and 
(iii) the establishment of minimum excise duty rates.  

The objectives of the Directive can be broken down into specific ones, which are close at 
hand and could be reached in the medium term and the general ones, which are meant to 
be reached in the long term.   

Once the objectives had been set out, it was believed that by carrying out the activities 
mentioned in the Directive certain results would materialise. In the medium term, there 
would be:  

1.  harmonisation  in  the  excise  duty  structures  applied  by  the  different  Member 

States;  

2.  progressive  convergence  in  the  tax  rates  applied  by  the  Member  States  to 
different categories of potentially substitute products, and in particular cigarettes 
and fine-cut tobacco;  

3.  the establishment of a tax ‘floor’ to reduce the affordability of tobacco  products 

for consumers by keeping the ‘entry price’ sufficiently high; 

4.  sufficient  flexibility  in  the  application  of  rules  to  local  conditions  and  -  where 
needed  -  derogations,  to  facilitate  adaptation  and  to  prevent  market  disruptions 
and unintended side effects;  

5.  an  overall  coherent  interpretation  and  application  of  EU  definitions,  categories 
and rules by all Member States authorities (i.e. removing any legal uncertainties 
that might possibly lead to discrepancies of classification or implementation).   

In  the  long  term  and  corresponding  to  the  general  objectives,  certain  impacts  were 
expected to take place: 

1.  the market was expected to be functioning without distortions; 
2.  the level of tax receipts would not be negatively affected;   
3.  regulatory  costs  would  be  minimal  in  comparison  with  the  savings  that  would 

stem from a harmonized system for tobacco products;  
4.  illicit trade affecting tobacco products would be reduced; 
5.  smoking prevalence level would diminish, with fewer people smoking in the EU. 

Several  external  influencing  factors  have  also  been  identified.  These  factors,  although 
independent  and outside the scope of the Directive are of importance because they can 
undermine or make stronger the effects of the intervention. 

The evaluation sought to test the links between the different elements mentioned in the 
intervention logic and verify if the expected results and impacts have materialized.   

8 

 
 
 
Figure 1. Intervention logic 

Source: European Commission 

9 

 
 
 
2.2.  Baseline and points of comparison  

EU-level  harmonised rules  on the excise duty applicable to  manufactured tobacco have 
been in place since the 1970s17. Many definitions are still in place since this period. For 
the  evaluation  of  the  Directive  it  is  important  to  consider  the  origin  of  the  rules  and 
provisions of the Directive and to distinguish ‘legacy’ measures from more recent ones. 
As  Directive  2011/64/EU  essentially  codified  the  previous  Directive  2010/12/EU,  the 
relevant differences are actually between this and pre-2010 versions.  

At the same time, it is important to establish whether the current legal framework on the 
whole is still fit for purpose, i.e. whether needs and priorities are met, whether the fiscal 
policy is still aligned with other related policy frameworks and goals (e.g. public health 
policies,  anti-fraud  policies)  and  whether  there  are  emerging  issues  not  (sufficiently) 
addressed  in  the  legal  text  currently  in  force.  This  dimension  goes  beyond  the  specific 
revisions  introduced  in  2010  and  questions  the  overall  fitness  of  the  current  EU 
framework  especially  in  an  interim  and  forward-looking  perspective.  This  dimension 
includes, for instance, the issue of recent products such as heated tobacco products and 
electronic cigarettes as well as the emergence of other new products. 

3.  Implementation / state of Play 

3.1.  Description of the current situation   

The  Directive  defines  the  fiscal  structures  and  the  minimum  levels  of  taxation  to  be 
applied to manufactured tobacco products.  

Transition  periods  and  several 
temporary  derogations,  allowing  reductions  and 
exemptions,  had  been  granted  to  Member  States  in  the  Directive.  The  main  transition 
period  allowing  some  Member  States  until  31  December  2017  to  reach  the  minimum 
requirements for overall excise duty (specific duty and ad valorem duty excluding VAT) 
has now expired18. Only one transition period foreseen in the Directive has yet to come 
into effect with the last stage of the gradual increase of minimum rate foreseen for fine-
cut tobacco as of 1st January 202019. 

Several actual and potential problems over the years have been identified as regards the 
structure  and  the  implementation  of  the  Directive  and  were  reported  in  the  previous 
evaluations and reports20.  

17 Council Directive 72/464/EEC and Council Directive 79/32/EEC 
18  Article  10(2)  provides  for  a  transitional  period  until  31  December  2017  for  certain  Member  States 
(Bulgaria, Estonia, Greece, Latvia, Lithuania, Hungary, Poland and Romania) to reach the 60% overall 
excise  duty  level.  In  accordance  with  Croatia’s  Accession  Treaty,  Croatia  was  allowed  the  same 
transitional period. 

19 From 1 January 2020, the overall excise duty on fine-cut tobacco intended for the rolling of cigarettes 
shall represent at least 50% of the weighted average price, or at least EUR 60 per kg -Article 14(2)  

20 See Commission Report COM(2015)621 final and Commission Report COM(2018)17 final 

10 

 
 
 
 
 
                                                           
The main problems identified were:  

  Subjective  criteria21  in  the  definitions  of  some  product  categories  resulting  in  legal 

uncertainty;  

  Tax-induced  substitution  between  products,  notably  between  cigarettes  and  fine-cut 
tobacco,  and  to  some  extent  'borderline'  cigarillos  (cigarillos  which  have  some 
characteristics similar to cigarettes such as dimension, filter, packaging, etc.  but can 
be sold to a much lower price thanks to a more favourable tax treatment). ; 
  Different applications of the Minimum excise duty rules by Member States; 
  The lack of a proper control system for raw tobacco and the risks of diversion to the 

illegal circuit; 

  Dual classification for excise and customs for the same products;  
  Demand for illegal products;   
  Disparities in the tax treatment of novel products across Member States.   

In general, it was verified that the Directive is still in line with the evolution of other EU 
policies,  initiatives  and  measures  as  presented  in  the  following  section  on  the  state  of 
play.  The  evaluation  verified  whether  certain  provisions  of  the  Directive  should  be 
reviewed because they are outdated, due to developments of other EU policy instruments 
and /or in light of the various CJEU rulings22. 

The  previous  evaluation  study  and  reports  confirmed  in  particular  the  lack  of  legal 
certainty of a number of provisions in the Directive23.  In an opinion delivered in 2016, 
Advocate  General  Wahl  noted  that  “Four  decades  after  the  introduction  of  the  first 
directive on the harmonisation of excise duties on manufactured tobacco products it may 
come as some surprise that the provisions laid down by the most recent directive on the 
matter still require interpretation by the Court of Justice”24. 

A new evaluation was needed following the conclusions of the 2018 Commission Report. 
This report set out the reasons why the Commission decided to not submit a proposal for 
revision of Directive 2011/64/EU at that moment in time. One of the main reasons was 
notably  the  lack  of  data  on  novel  products  such  as  electronic  cigarettes  at  EU  level. 
Another  reason  was  that  minimum  rates  could  not  be  examined  because  some  of  the 
current transitional periods had not yet ended and not all increases had entered into force. 

3. 2 State of play 

Including value added tax (VAT) the total tax revenue from tobacco products in the EU 
amounted to EUR 106.5 billion in 2016, with the VAT component accounting for about 
ca.  22.5% of the total. Overall, this figure represents some 2.7% of the total tax revenue 
(including VAT) collected in the EU.   

21  For  example:  ‘capable  of  being  smoked’,  ‘without  further  industrial  processing’,  ‘consumer 

expectations’, ‘exclusively intended to be smoked as it is’ 

22 See a list of the main CJEU rulings in annex 5 
23 Ramboll, EA 2017 
24 AG Wahl, case C‑ 221/15, Etablissements Fr. Colruyt. 
11 

 
 
                                                           
Cigarettes  remain  by  far  the  main  source  of  these  tax  receipts.  Despite  reduced 
consumption levels, excise duty receipts have slightly increased. Overall, the total excise 
duty  revenue  from  tobacco  in  2016  was  EUR  82.3  billion  (59%  of  market  value, 
increasing by 0.7% (year-on-year) for the 2010-17 period. 

Figure 2. Tobacco market statistics 

Source: EA study 2019 

During  the  period  covered  by  this  evaluation,  the  global  sales  of  tobacco  products 
continue the decreasing trend already experienced during the previous period. A notable 
exception  is  fine-cut  tobacco  where  the  volumes  are  slightly  growing  while  there  is  a 
strong raise in  market  value linked to  the price increase. The figure below presents  the 
overall EU market trends since 2005. 

12 

 
 
 
Figure 3. Trends for tobacco products 

Source: EA study 2019 

E-cigarettes are currently not subject to a harmonised tax under the Directive. The main 
commercial  uptake  of  e-cigarettes  in  the  EU  started  after  the  adoption  of  Directive 
2011/64/EU, which is therefore silent on their taxation. However, almost half of Member 
States have since then introduced an ad hoc tax at national level. The Tobacco Products 
Directive adopted in 2014 lays down rules governing the manufacture, presentation and 
sale  of  tobacco  and  related  products.  In  particular,  it  provides  for  a  definition  of  e-
cigarettes25.  In  line  with  its  Article  20,  e-cigarette  is  a  product  that  can  be  used  for 
consumption of nicotine-containing vapour via a mouth piece, or any component of that 
product, including a cartridge, a tank and the device without cartridge or tank. Electronic 
cigarettes  can  be  disposable  or  refillable  by  means  of  a  refill  container  and  a  tank,  or 
rechargeable with single-use cartridges. 

Official  data  on  the  size  of  the  e-cigarettes  market  and  consumption  levels  are  still 
unavailable.    However,  the  study  was  able  to  present  solid  estimates  based  on  various 
sources.  

25 see art 20 of Directive 2014/40/EU (OJ L 127, 29.4.2014, p. 1–38) 

13 

 
  
 
 
 
 
                                                           
The number of e-cigarettes regular consumers in the EU has doubled between 2013 and   
2017 from approximately 6 to more than 12 million users. The majority of them use e-
cigarettes  daily.  Converting  non-daily  into  daily-equivalent  users,  the  total  number  of 
users is  estimated to  be  close to  10 million.  The highest  prevalence is  registered in  the 
United Kingdom and France where it exceeds 4-5% of the population, while in other EU 
countries it typically amounts to 1-2%. 

The  value  of  the  e-cigarettes  market  in  the  EU  is  estimated  at  about  EUR  2.54  billion 
(2017). The estimates indicate that the largest national markets are, the United Kingdom 
(EUR 776 million) and France (EUR  544 million).  Italy, Germany  and Poland are also 
relatively large markets, worth between EUR 100 and 300 million. 

Figure 4. Estimated market value of e-cigarettes in Member States (EUR million) 

2014

2017

66  60  54  47  44  43  39  33  30  29  23  23  20  11 

30 

776 

544 

900

800

700

600

500

400

300

200

100

0

274  272 

124 

Source: EA study 2019 

Recent  market  trends  remain  unclear  for  e-cigarettes  depending  on  the  source  of  the 
market  estimates  as  shown  in  Figure  5  below,  with  the  market  steadily  growing  in  the 
most  positive  market  outlook  or  a  substantial  slow-down  in  the  worst  case  scenario. 
Demand  for  e-cigarettes  started  to  grow  rapidly  in  the  early  2010s,  but  appears  to  be 
levelling  off.  The  emergence  of  new  products  could  also  affect  the  future  market 
developments. 

14 

 
 
 
 
 
Figure 5. E-cigarettes market trends in the EU 

EU vapers (million) 

11,5 

11,3 

10,4 

15

14

13

12

11

10

9

8

7

6

5

8,1 

2014

2015

2016

2017

min

average

max

Source: EA study 2019 

Heated  Tobacco  Products  (HTP)  are  also  not  explicitly  mentioned  in  Directive 
2011/64/EU since the product appeared on the market after its entry into force. Member 
States  have  different  views  on  whether  it  should  be  considered  as  an  excisable 
manufactured  tobacco  product  or  not  and,  if  taxable,  which  excise  category  can  be 
applied.  In  less  than  two  years,  HTP  have  been  introduced  in  17  Member  States  and 
further  expansion  is  expected,  so  more  and  more  tax  authorities  have  been  called  to 
decide  which  regime  to  apply.  The  level  of  fragmentation  is  high,  with  some  Member 
States applying an ad hoc tax regime while others chose to include them under the 'other 
smoking tobacco' harmonised category. 

Market size in 2017 was 1.9 billion pieces with a market value of EUR 432 million. With 
other competing products with similar concepts being launched and other new generation 
platforms being developed, it is expected that the market will continue evolving rapidly 
in the near future. The rapid uptake in Japan  26of heated tobacco is an indication  of the 
potential  of  these  products  although  specific  cultural  drivers  should  be  taken  into 
account.  

26 https://tobaccoatlas.org/  

15 

 
 
 
                                                           
Figure 6. Users of heated tobacco products in the EU 

Number of users (million) 

1,4

1,2

1

0,8

0,6

0,4

0,2

0

Q2 2017

Q3 2017

Q4 2017

Q1 2018

Q2 2018

Source: EA study 2019 

It is important to stress that the market value for e-cigarettes and heated tobacco products 
remain however small (around EUR 3 billion) in comparison to the total cigarette market, 
valued at approximately EUR 119 billion. 

Finally, market  developments in  products  that can be seen as substitutable to  cigarettes 
have been accelerating in the past months and years. 

The consumption of smokeless tobacco products and notably commercial chew bags of 
nicotine  (as  opposed  to  medical  gums)  appears  to  be  growing,  mostly  in  Northern 
Europe.  Sale  of  snus  is  illegal  in  all  the  EU  except  Sweden  but  it  is  legal  for  foreign 
travellers to buy (and carry back personally) for personal use. Despite this constraint and 
requirement, other neighbouring Member States are affected and for example 8% of boys 
aged 14-20 years are daily users of snus in Finland27.   

The  potential  growth  of  cannabis  products  has  also  been  reported  recently,  notably  as 
vaporisation of CBD (cannabidiol) which can be used in electronic vapour devices28. 

27   Finnish Institute of Health and Welfare, Tobacco Statistics, appendix tables 9 and 10 
28 The Single Convention on Narcotic Drugs (1961) limits the use of cannabis or cannabis resin exclusively 
to  medical and scientific purposes. cannabidiol,  although not expressly listed in the schedules of the 
International  Drug  Control  Conventions,  is  covered  by  the  entry  “Cannabis  and  cannabis  resin  and 
extracts and tinctures of cannabis” in Schedule I of the Single Convention on Narcotic Drugs provided 
that it is obtained as an extract of cannabis (and not artificially synthetised). 

16 

 
 
 
                                                           
4.  Method 

4.1. 

Short description of methodology 

The retrospective evaluation of the Directive can be broadly classified as a theory-based 
evaluation. It implies working on the basis of an intervention logic, which describes the 
Directive  through  a  diagram  of  logically  connected  elements:  the  original  problems 
which  were  meant  to  be  addressed,  the  provisions  of  the  Directive  (activities),  the 
objectives to be reached (both specific ones as well as general one), the expected results 
and  broader  impacts.  An  intervention  logic  was  reconstructed  for  the  purpose  of  the 
present evaluation (see figure 1) and constituted the point of departure for the analysis.  

The  study  supporting  the  evaluation  of  the  Directive  followed  a  mixed-methods 
approach,  featuring  a  range  of  tailored  and  targeted  techniques  and  tools.  The  analysis 
was based predominantly on the desk research, analysis of economic and statistical data, 
numerous  consultations  with  stakeholders  and  Member  States  administrations  (both 
fiscal  administrations  and  public  health  authorities)  and  a  public  consultation.  All 
information about the scope, organisation and context of the supporting study as well as 
all the operational details behind the methodological choices are included in Annex 3. 

4.2.  Limitations and robustness of findings 

The  study  findings  largely  rely  on  extensive  panel  data.  The  consultant  was  able  to 
collect a wide range of data set and secure consistency between them to come up with a 
solid analysis. 

The  main  challenge  was  the  lack  of  validated  and  comprehensive  data  (notably  due  to 
inconsistencies,  incompleteness  of  data,  and  lack  of  verifiable  independent  sources),  in 
particular,  for  illicit  trade,  smoking  prevalence  and  electronic  cigarettes.  However,  the 
study  made  a  determined  effort  at  getting  estimates  and  at  the  triangulation  of  the 
different available sources.  

For  example,  for  cross-border  trade,  no  valid  source  of  data  is  currently  available  to 
estimate the final use of cigarettes moved. The study worked out an estimate of the share 
of  cigarettes  actually  intended  for  legitimate  own  consumption  against  those  that  are 
instead diverted to illicit reselling.  

The  consultant  carried  out  an  inventory  of  available  data  during  the  inception  phase  of 
the study.  Some of the datasets identified turned out to be incomplete or inconsistent to 
support  an  econometric  assessment.  To  address  the  numerous  consistency  and 
completeness  issues  that  emerged  the  consultant  engaged  in  a  substantial  effort  of 
systematisation of datasets. This effort resulted in the provision of a thorough answer to 
the  descriptive  questions  on  the  overtime  trends  in  the  market  and  taxation  of  tobacco, 
and  the  utilisation  of  these  data  in  the  quantitative  analysis  models  further  detailed  in 
Annex 3. 

17 

 
 
 
This  considerable  effort  by  the  consultant  already  signals  the  need  for  a  more  efficient 
monitoring and data reporting, and notably a better use of the Commission Implementing 
Decision of 201129 which indicates the list of statistical data on the structure and rates to 
be reported by the Member States.   

5.  Analysis and answers to the evaluation questions 

5.1.  Effectiveness 

This  section  analyses  the  progress  made  towards  achieving  the  objectives  set  by  the 
Directive,  and  in  particular  the  functioning  of  the  internal  market,  the  fight  against  tax 
fraud and illicit trade and ensuring a high level of health protection.  

Evaluation question:  

To  what  extent  have  the  current  minimum  rates  helped  and  supported  in  ensuring  the 
proper functioning of the internal market (including competition)?        

The importance of revenue collection from tobacco excise duties for the budget of 
Member States 

An  important  aspect  to  be  considered  is  the  quantification  of  revenues  for  the  Member 
States:  the  figures  below  show  the  importance  of  tobacco  tax  revenues  for  Member 
States. The levels of tobacco tax revenues are diversified in the EU and generally deliver 
a relevant contribution to the budget of the Member States as shown in Table 1.  

29  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 

18 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
Table 1. Tobacco tax incidence on Member States total tax revenue 

MS 

Excise Duty Revenue 
2016 (€ million) 
1,835 
AT 
2,351 
BE 
1,178 
BG 
189 
CY 
2,014 
CZ 
14,182 
DE 
956 
DK 
192 
EE 
2,504 
EL 
7,211 
ES 
968 
FI 
11,043 
FR 
592 
HR 
1,008 
HU 
1,098 
IE 
10,711 
IT 
274 
LT 
533 
LU 
190 
LV 
87 
MT 
2,491 
NL 
4,189 
PL 
1,513 
PT 
2,057 
RO 
944 
SE 
412 
SI 
672 
SK 
11,095 
UK 
EU 
82,488 
TTR= total tax revenues 
Source: EA study 2019 

Excise Duty+VAT Revenue 
2016 (€ million) 
2,356 
3,086 
1,477 
237 
2,637 
18,187 
1,312 
248 
3,296 
9,285 
1,213 
14,065 
795 
1,419 
1,405 
14,015 
361 
684 
244 
108 
3,278 
5,488 
2,010 
2,729 
1,280 
537 
914 
13,847 
106,512 

Excise Duty+VAT / TTR ratio 
2016 
2.4% 
2.4% 
14.5% 
5.2% 
7.5% 
2.4% 
1.0% 
5.1% 
6.8% 
3.7% 
1.8% 
2.2% 
.. 
4.8% 
2.6% 
2.8% 
5.3% 
4.7% 
4.3% 
4.0% 
1.9% 
6.2% 
4.3% 
9.0% 
0.7% 
6.0% 
6.2% 
2.1% 
4.4% 

The contribution of the Directive to the convergence of tax levels between Member 
States has been mixed 

The ‘convergence’ objective of the EU excise legislation is primarily aimed at preventing 
the risk that high tax differentials may generate significant flows of products from low-
tax to high-tax countries with ensuing distortive effects on competition, on tax receipts of 
Member States. This would ensure the smooth functioning of the Single Market.   

19 

 
 
 
 
In order to attain that convergence, an EU minima was introduced. The EU minima were 
intended inter alia to facilitate convergence in the tax rates applied in Member States, that 
is a reduction in the ‘gap’ between the lowest and the highest-taxing countries.  

Evidence from the study indicates that the Directive provisions on minimum excise rates 
have  been  moderately  effective  in  raising  tax  rates  and  prices  in  Member  States, 
especially in the case of cigarettes and fine-cut tobacco, and with particular reference to 
the low-price segment of the market.  

According to the study, the contribution of the Directive to the convergence of tax (hence 
price) levels between Member States has been mixed. In fact, the gap between ‘high-tax’ 
and ‘low-tax’ countries has slightly expanded as a result of some Member States having 
adopted  a  strong  public  health  agenda  and  having  further  increased  their  rates.  EU 
minimum rates have however contributed somewhat to mitigating such a larger gap with 
a  progressive  increase  and  a  transitional  period  granted  to  a  number  of  Member  States 
until end 2017. Transitional periods were granted to allow some Member States30 to adapt 
smoothly to reach 60% overall excise duty level, thus limiting possible side effects.  

Overall,  the  achievement  of  the  ‘convergence’  objective  by  means  of  EU  minima 
provision  appears  inherently  problematic.  Convergence  would  require  not  only  a 
‘minimum floor’ but also a ‘maximum ceiling’ target. Maximum rates are unfeasible and 
undesirable from a public health perspective. In this sense, the EU minima do not seem 
fit to achieve a significant degree of convergence, although they may still help avoiding 
that tax (and price) differentials get even wider.  

The figure below illustrates the degree of convergence occurred in Member States excise 
rates compared to what happened to prices. The excise duty yield represents specific duty 
and the ad valorem duty levied per quantity of products (units or weight), measured at the 
level  of the weighted average price. As seen in  figure 7, excise duty  yields levels  have 
grown  in  all  Member  States  in  the  2010-17  period,  with  the  EU  average  moving  from 
EUR 113.1 to EUR 148.5 per 1000 cigarettes, in current price terms. 

30  Article  10(2)  of  the  Directive  provides  for  a  transitional  period  until  31  December  2017  for  certain 
Member States (Bulgaria, Estonia, Greece, Latvia, Lithuania, Hungary, Poland and Romania) to reach 
the 60% overall excise duty level. 

20 

 
                                                           
Figure 7. Excise yields of cigarettes in Member States (2011 and 2017) (Excise duty levied in EUR per 1000 sticks) 

2010 
EU average: 113.1 

2017 
EU average: 148.5 

 Source: EA study 2019 

Effectiveness of the tax structure requirements 

The  Directive  requires  Member  States  to  levy  a  minimum  rate  of  excise  duties  on 
cigarettes,  as a  way to  deter consumption through taxation and to  ensure that at  least  a 
certain  minimum  amount  of  taxation  applies  throughout  the  Union.  The  minimum  rate 
must  consist  of  a  specific  component  and  ad  valorem  component.  The  mixed  structure 
gives Member States sufficient leeway in setting the rates. The ad valorem element is a 
percentage of the retail  price. The specific element is a set amount of money per 1,000 
cigarettes. This mixed structure requirement leaves some flexibility to adapt the level of 
each component nationally.  

As regards this tax structure, the study notes that Member States have slightly increased 
their  reliance  on  specific  taxation  as  opposed  to  ad  valorem  taxation  in  the  period 
considered.  However  this  process  was  only  indirectly  related  to  the  very  flexible 
provisions  of  the  Directive  in  this  area,  and  therefore  the  evidence  of  impacts  of  the 
Directive on tax revenue stability or price accessibility is not apparent.  

The  study  indicates  that  overtime  there  is  an  increased  incidence  of  the  specific 
component of the excise duty in Member States. However the rather wide 7.5%-76.5% of  

21 

 
 
 
 
 
the total  tax burden threshold for the specific component on cigarettes should  be noted 
and  the  difference  in  excise  duty  structure  remain  significant  (the  specific  component 
varies from 10% in Italy to 74% in Denmark).  

Figure 8. Structures of taxation on cigarettes in percentage of the Weighted Average Price 

90

80

70

60

50

40

30

20

10

90

80

70

60

50

40

30

20

10

0

AT BE BG CY CZ DE DK EE EL ES FI FR HR HU IE IT LT LU LV MT NL PL PT RO SE SI SK UK
0

AT BE BG CY CZ DE DK EE EL ES FI FR HR HU IE IT LT LU LV MT NL PL PT RO SE SI SK UK

Share of specific Excise

Share of ad valorem Excise

Share of VAT

Share of specific Excise

Share of ad valorem Excise

Share of VAT

Source: DG Taxud Excise Duty Tables, as of July 2018 

More  concrete  impacts  are  associated  to  the  recourse  to  the  ‘minimum  excise  duty’ 
(MED) provision, e.g. on price convergence and reduction of price accessibility.  

The Minimum Excise Duty represents the minimum amount of excise duty (per quantity 
of product) that a Member State can decide to levy on certain tobacco products when the 
sum of specific and ad-valorem duties falls below an established threshold that is defined 
nationally. Recital 12 of the Directive notes that Member States should be given effective 
means to levy specific or minimum excise duty on cigarettes, so as to ensure that at least 
a certain minimum amount of taxation applies throughout the Union. The MED consists 
in a tax ‘floor’ and was designed to prevent the risk of too low taxation (hence too low 
prices) and 'race to bottom' in the cheaper segments of the market.  

The study shows that the MED has been the single most effective component of excise 
taxation as regards the impact on price levels. In particular, it has contributed to sustained 
‘entry price’ levels overtime, thus reducing the accessibility of tobacco products. 

22 

 
 
The current structure of the tax is not perceived as posing major problems for Member 
States. 

Figure 9. Feedback from Member States on the harmonisation of structures 

MIXED STRUCTURE 

  Satisfied with the harmonisation of structures: 9 countries 
 

In favour of further harmonisation: 9 countries 

o  Decrease upper limit: 2 countries 
o  Increase lower limit: 4 countries 

 
 

In favour of dropping the mixed structure: 3 countries 
In favour of a mixed structure obligation for fine-cut tobacco: 7 
countries 

Source: EA study 2019, based on the targeted consultation of national authorities  

Fine-cut tobacco tax gap still an issue 

One  of  the  underlying  principles  of  the  Directive  was  to  ensure  similar  effects  on 
cigarettes  and  on  fine-cut  tobacco  (FCT).  However,  the  difference  in  the  monetary  EU 
minimum rates for the two products has not reduced in the 2011-2017 period. The price 
differential  remains  high  in  Belgium,  Luxembourg  and  Germany  where  the  FCT/ 
cigarettes price ratio is lower than 40%. By contrast, in Bulgaria, Greece and Sweden the 
ratio exceeds 90%. In other words, it is relatively much cheaper to buy fine-cut tobacco 
instead of cigarettes in Belgium than it is in Greece. 

Many Member States have autonomously increased the taxation of fine-cut tobacco more 
than  cigarettes  and  as  a  result  tax-induced  substitution  has  slowed  down,  but  the 
contribution of the Directive to this aim remains insufficient.    

Figure 10 shows that the tax level ‘gap’ between cigarettes and fine-cut tobacco remains. 
The Directive was not entirely effective in reducing this gap. 

23 

 
 
 
 
 
 
 
 
 
 
 
 
Figure 10. Fine-cut tobacco/cigarettes price ratio across the EU (at WAP) 

[VALUE] 

56% 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

2010

2011

2012

2013

2014

2015

2016

2017

min

average

max

Source: EA study 2019 

Furthermore,  a  clear  and  agreed  equivalence  in  terms  of  conversion  rate  between 
cigarettes  and  fine-cut  tobacco  is  missing  in  the  tobacco  tax  directive31.  As  the  study 
notes, there is no standard equivalence between FCT (expressed in grams) and cigarettes 
(expressed in sticks), so the comparison of rates is not straightforward.  

It should be noted that there is still one outstanding increase of the minimum rate for FCT 
provided  for  in  the  Directive  to  take  place  in  2020.  Despite  this  final  increase,  the  gap 
remains a source of concern (see also the section on relevance in section 5.4).  

As  shown  in  Figure  11,  fine-cut  tobacco  represents  a  significant  source  of  revenue  for 
some Member States. 

31 A ‘0.75g per stick’ equivalence is used in the Tobacco Product Directive 

24 

 
 
 
 
 
 
                                                           
Figure 11. Tax receipts from fine-cut tobacco out of total tobacco receipts in the EU (2017) 

35%
30%
25%
20%
15%
10%
5%
0%

9,47% 

S
E

I
F

L
P

T
P

T
I

Z
C

I

T S
M

T
A

K
D

R
H

E
S

G
B

E
E

K
S

V
L

T
L

O
R

U
L

U
H

E
B

L
N

L
E

K
U

E
D

R
F

Y
C

E
I

e
g
a
r
e
v
a
U
E

Source: EA study 2019 

Evaluation question:  

To what extent have the current minimum rates helped and supported in fighting against 
tax fraud, tax evasion and illegal cross-border shopping? 

Illicit trade and unrecorded tobacco consumption 

Tobacco taxes and tax systems may create financial incentives for those who engage in 
legal  and  illegal  activities  to  either  reduce  (tax  avoidance)  or  completely  avoid  tax 
liabilities (tax evasion). The general rule is that taxes on tobacco products have to be paid 
in the Member State of release for consumption according to the rate in place there. 
As  noted  in  the  impact  assessment32  for  the  revision  of  the  Horizontal  Directive  33,  the 
movement of excise goods has a high inherent fiscal risk. For tobacco products notably, 
the following reasons appear particularly relevant: 

1.  The duty rates of tobacco products lead to a taxation burden that is much greater than 

the net value of the goods. 

2.  The duty rates vary greatly from one Member State to another, which acts as a strong 
incentive to fraudsters to divert excise goods from low-rate Member States to re-sell 
them to the illicit markets of high-rate Member States.  

3.  The total amount of excise duty due on excise goods is collected from one tax payer at 
a  single  time  and  location,  which  makes  excise  duty  more  vulnerable  to  fraud  than 
other types of indirect taxes34. 

32 See Impact Assessment report SWD(2018)259 final/2 
33 OJ L 316, 31.10.1992, p. 21. 
34 For instance, VAT is collected at each step of the supply chain and requires information reports for both 
sales  and  purchases.  Moreover,  one  firm’s  revenues  are  another  firm’s  costs  and  consequently  VAT 
evasion incentives are mutually inconsistent.  

25 

 
 
 
 
 
 
 
                                                           
The schema below helps visualising the existence of an unrecorded tobacco consumption 
and its different components. 

Figure 12.Components of unrecorded tobacco consumption 

Source: EA study 2019 

The level of illicit trade remains a source of concern 

The challenge posed by the illicit tobacco trade remains as preoccupying today as it has 
been in the past35. The study finds that illegal products account for approximately 8% of 
actual  cigarettes  consumption  (see  estimates  in  Table  2).  Counterfeited  cigarettes  still 
rank as the number one category of detained articles by customs at EU external borders36.  

It  should  be  noted  that  a  more  precise  estimation  of  these  trends  is  difficult  due  to  the 
lack  of  validated  and  comprehensive  data.  As  noted  in  section  4.2,  estimates  on  illicit 
trade  are  uncertain  and  difficult  to  match.  With  this  in  mind,  the  European  Anti-Fraud 
Office (OLAF) has launched a study to identify an approach to measure the illicit market 
for tobacco and conclusions are expected for 2020. 

35 Progress report on the implementation of the Commission Communication "Stepping up the fight against 
cigarette smuggling and other forms of illicit trade in tobacco products - a comprehensive EU strategy 
(Com (2013) 324 final of 6.6.2013)" (COM(2017)235 final 

36 Report on the EU customs enforcement of intellectual property rights, 2018 

26 

 
 
 
                                                           
Table 2. Magnitude of illegal product consumption across EU Member States (2010-16) 

Member State 

AT 
BE 
BG 
CY 
CZ 
DE 
DK 
EE 
EL 
ES 
FI 
FR 
HR* 
HU 
IE 
IT 
LT 
LU 
LV 
MT 
NL 
PL 
PT 
RO 
SE 
SI 
SK 
UK 

Average 
illegal 
cigarettes  
(bn sticks 
per year) 
0.48 
0.48 
2.49 
0.05 
0.54 
4.45 
0.16 
0.32 
3.48 
3.39 
0.67 
7.23 
0.19 
0.55 
0.52 
4.63 
1.00 
0.02 
0.76 
0.06 
0.89 
6.42 
0.22 
3.80 
0.57 
0.24 
0.12 
3.76 

Average 
actual 
consumption 
(bn sticks 
per year) 
15.22 
10.51 
14.17 
1.53 
14.98 
99.19 
6.76 
1.80 
22.99 
54.65 
6.83 
62.88 
6.70 
9.61 
5.07 
82.52 
3.67 
1.81 
2.57 
0.83 
13.63 
47.75 
11.24 
26.42 
6.70 
4.90 
6.95 
44.75 

Incidence of 
illegal 
cigarettes  
on actual 
consumption 
3.1% 
4.3% 
14.5% 
3.3% 
3.8% 
4.3% 
2.2% 
15.1% 
13.3% 
5.9% 
9.1% 
10.3% 
5.0% 
5.5% 
9.2% 
5.3% 
20.9% 
1.3% 
22.6% 
6.9% 
6.1% 
12.0% 
1.9% 
12.6% 
7.9% 
4.6% 
1.7% 
7.9% 

EU 

47.48 
(*) HR: period 2013-2016 
Source: EA study 2019 

586.66 

8.1% 

A  combination  of  legislative  responses,  robust  law  enforcement  and  enhanced 
cooperation at national, European and international levels  are promoted to fight  against 
this illicit trade37. Notably the following measures are encouraged:  the implementation of 
the  World  Health  Organisation  (WHO)  Framework  Convention  for  Tobacco  Control 
(FCTC) Protocol  to  eliminate  Illicit Trade in  Tobacco products38, to  engage source and 
transit  countries,  to  invest  in  intelligence  and  analysis,  to  focus  on  some  key  input 
materials (machinery, raw tobacco, filters), to raise consumer awareness regarding illicit 
trade, to launch targeted operations and to keep monitoring developments.  

37 2nd Action Plan to fight the illicit tobacco trade 2018-2022 (COM(2018)846 final) 
38 http://www.who.int/fctc/protocol/en/  

27 

 
 
 
 
 
 
 
 
 
 
                                                           
Finally, it is expected that that the entry into force of the tracing system as foreseen under 
the Tobacco Products Directive39 will impact the level of illicit trade. The EU traceability 
system40 applies to cigarettes and roll your own products both manufactured in the EU as 
well as those manufactured outside the EU which are destined for the EU market as of 20 
May 2019. As of 2024, it will apply to all tobacco products. It allows for the monitoring 
of  the  current  location  of  a  product  within  the  supply  chain,  creation  of  a  time  and 
location  record  for  all  movements  of  that  product  (tracking),  as  well  as  identifying  the 
past locations of a product to verifying the product's route back to its origin (tracing).  

The study estimated the tax revenue losses possibly caused by trade of illegal products as 
shown in Table 3. The purpose is to illustrate the magnitude of the impact of illicit trade 
on tax revenues. This estimation is made by calculating the hypothetical revenue yield of 
illegal products if they were taxed in the country of consumption at the prevailing rates. 
This estimate serves therefore mainly as an illustration of the impact of illicit trade. The 
policy measures to address this problem of fraud mainly regard control enforcement, and 
consumer  education.  Additionally,  there  is  a  clear  incentive  to  reduce  price  gaps  with 
neighbouring countries and to pursue efforts to negotiate tax approximation objectives in 
bilateral agreements with third countries41.  

Table 3. Estimated excise duty revenue loss caused by illegal cigarettes 

Member State 

Excise Duty ‘loss’ from cigarettes (average 2010-16, 
EUR million)  

AT 
BE 
BG 
CY 
CZ 
DE 
DK 
EE 
EL 
ES 
FI 
FR 
HR 
HU 
IE 
IT 
LT 
LU 
LV 
MT 
NL 

60 
70 
196 
6 
45 
660 
24 
28 
397 
438 
101 
1,451 
16 
45 
145 
608 
73 
2 
61 
8 
147 

Incidence 
on Excise Duty 
revenues 
3.8% 
4.3% 
21.0% 
3.5% 
2.6% 
5.4% 
2.4% 
17.9% 
17.7% 
6.4% 
14.0% 
14.9% 
3.1% 
5.7% 
14.7% 
5.9% 
34.1% 
0.6% 
39.6% 
11.3% 
8.0% 

39 Directive 2014/40/EU 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 (OJ L 127, 29.4.2014, p. 1–38) 

40 See the European systems of tobacco traceability and security features  
41 See the Association Agreement between the European Union and its Member States, of the one part, and 

Ukraine, of the other part.  

28 

 
                                                           
PL 
PT 
RO 
SE 
SI 
SK 
UK 

EU 

Source: EA study 2019 

561 
25 
324 
89 
23 
11 
1,066 

6,683 

14.1% 
2.0% 
18.6% 
9.7% 
5.6% 
1.7% 
10.4% 

9.1% 

29 

 
 
 
 
 
 
 
Significant differences in price levels among Member States create significant 
tobacco control and tax revenue issues. 

Figure 13. Prices of a pack of cigarettes in euro 

Source: DG Taxud - Excise Duty Tables, based on Weighted Average Price, March 2019 

The ‘convergence’ objective of the EU excise legislation is primarily aimed at preventing 
the risk that high tax differentials may generate significant flows of products from low-
tax to high-tax countries with ensuing distortive effects on competition and ultimately on 
tobacco  control  targets  and  tax  receipts  of  Member  States.  Evidently,  such  flows  are 
immediately linked, if any, to  price differentials rather than tax levels,  but  as the study 
notes there is a statistically significant correlation between excise duty levels and prices. 

As a possible consequence of the lack of convergence in price levels between countries, 
the  incidence  of  cross-border  flows  of  duty-paid  cigarettes  from  low-tax  to  high-tax 
countries  has  increased.  The  study  estimates  the  EU  aggregated  net  effects  at 
approximately EUR 2.5 billion of revenue losses. In certain Member States this situation  

30 

 
 
 
causes  significant  concerns  not  only  to  revenue  collection  but  also  to  health  protection 
measures taken at national level.  

The  non-domestic  level  (NDL)  indicator  used  in  the  study  reflects  the  share  of 
unrecorded tobacco consumption that is taxed in a Member States that is different from 
the  country  of  final  consumption.  In  the  study,  the  definition  of  NDL  includes  both 
products moved for private consumption and those moved for (illicit) reselling.  

The  study  estimates  the  share  of  these  flows  that  is  possibly  driven  by  economic 
incentives – i.e. price differences that are sufficiently high to justify not only purchases 
for private consumption by tourists or travellers, but also to ensure an economic profit in 
case of illicit reselling or travelling for the sole purpose of buying cigarettes.  

In this respect, as noted in section 4.2, it is important to highlight that no valid source of 
data is currently available to estimate the final use of cigarettes moved cross-border, and 
in particular the share of cigarettes eventually intended for legitimate own consumption 
against those that are instead diverted to  illicit reselling. So, the concept  of ‘economic-
driven flows’ elaborated in the study designates the subset of the total flows that contain 
also,  but  not  only, products  illicitly resold,  while excluding the subset of those that are 
certainly for private use because their price in the country of purchase is similar or higher 
than in the country of destination. 

The study notes that five Member States (Ireland, the United Kingdom, Germany, France 
and  Finland)  experience  a  significant  revenue  loss  while  seven  Member  States 
(Luxemburg,  the  Czech  Republic,  Estonia,  Poland,  Lithuania,  Spain  and  Romania) 
register considerable extra revenue (see Figure 14). 

31 

 
 
 
 
 
 
 
 
 
 
 
 
 
Figure 14. Economic driven NDL incidence on excise duty revenue (%) 

EU

LU

CZ

EE

PL

LT

ES

RO

SK

BG

HU

PT

LV

CY

HR

MT

SI

IT

EL

DK

BE

AT

SE

NL

FI

FR

DE

UK

IE

-25% -15% -5% 5% 15% 25% 35%

Source: EA study 2019 

The  findings  of  the  study  point  out  at  the  importance  of  cross  border  level  indicate 
despite the ambition of enhanced harmonisation  and convergence of taxes as envisaged 
in the Directive under recital 15 (‘certain degree of convergence’) and Article 7(3) (‘final 
stage of harmonisation’). 

The rise of illicit bulk tobacco and illicit manufacturing inside the EU 

Overall  the  illicit  trade  of  non-taxed  cigarettes  is  declining  in  the  EU,  however  it  is 
reportedly on the rise for ‘bulk’ tobacco. Illegal bulk tobacco may be destined for ‘hand-
rolled’  consumption,  but  could  also  be  destined  for  the  manufacture  of  other  products 
(cigarettes,  water-pipe  tobacco,  smokeless  tobacco  products,  and  snus  in  Sweden).  The  

32 

 
 
 
 
 
 
lack  of  control  of  raw  tobacco  is  of  particular  concern  with  evidence  of  increasing 
diversion to the illicit manufacturing of cigarettes inside the EU. The operations of illegal 
manufacturing sites inside the EU are of particular concerns to investigators42. 

Experts from Member States’ customs and taxation authorities confirmed this analysis in 
a  dedicated  workshop  on  raw  tobacco43.  The  existing  reporting  of  tobacco  production 
levels  at  national  level  is not  sufficient  to allow for the monitoring of the flows of raw 
tobacco  across  borders  inside  the  EU44.  The  need  to  track  movements  of  raw  tobacco 
once  imported  into  the  EU  was  also  noted.  In  particular,  the  absence  of  a  harmonised 
definition  of  raw  tobacco  was  seen  as  a  major  limit  to  allow  for  proper  cross  border 
monitoring. 

The  figure  below  shows  the  quantity  of  seizures  for  14  EU  countries  over  the  last  6 
years45. 

Figure 15. Rise of the illicit bulk tobacco in the EU 

3000

2500

2000

1500

1000

500

0
2011

2013

2015

2017

Seizures in tonnes, 14 EU Member States

Source: EA study 2019 (seizures in tonnes, 14 EU Member States) 

These seizures represent for some Member States a major share of the fine-cut tobacco 
legal market. 

42 The Olaf report 2018 
43 Fiscalis workshop on raw tobacco with experts from Member States, Budapest, June 2019 
44 Commission Implementing Regulation (EU) 2017/1185 (notification of harvest) 
45 These countries were in a position to report such seizures. Data has been consolidated and anonymised. 

33 

 
 
 
 
                                                           
Figure  16.  Average  seizures  in  15  EU  countries  (2011-17,  in  tonnes)  as  a  proportion  of  average  fine-cut 
tobacco released for consumption. 

Source: EA study 2019. Axis: EU countries (I – XV, anonymised).  

Evaluation question:  

To what extent have the current minimum rates helped and supported in provide a high 
level of health protection? 

The smoking prevalence remains high 

The study  found a clear  decline of smoking prevalence in  all the EU  region. However, 
this decline remains far from the decline levels expected in the 2008 Impact Assessment46 
supporting  the  proposal  for  Directive  2010/12/EU  amending  Directives  92/79/EEC  and 
92/80/EEC  on  tobacco  taxation.  Its  objective  of  a  reduction  of  smoking  prevalence  by 
10% over the 5 years following adoption was not met.  

46 See Commission Impact Assessment report 2008: SEC(2008)2266 

34 

 
 
 
 
 
 
 
 
                                                           
Figure 17. Smoking prevalence in the EU 

Source: EA study 2019 

Overall,  the  study  found  that  EU  minimum  rates  have  mainly  supported  public  health-
related  impact  in  only  a  minority  of  Member  States  in  Eastern  Europe.  The  study 
confirms  that  taxation  has  proved  to  be  a  main  driver  for  the  reduction  of  smoking 
prevalence. 

The impact of taxation on dissuading youth from smoking in some Member States 
has been lower than expected 

An  important  concern  in  tobacco  control  is  the  smoking  prevalence  among  the  young 
generation.  The  study  notes  that  the  impact  of  taxation  on  dissuading  youth  from 
smoking  in  some  Member  States  has  been  lower  than  expected  due  inter  alia  to  the 
substitution of cigarettes with  less expensive products  like fine-cut  tobacco or, in  some 
Member States, with water-pipe tobacco. As noted under the previous question, there are 
serious  concerns  with  the  illicit  trade  levels  for  these  two  products.  These  levels 
jeopardise the achievement of tobacco control and health protection objectives. 

The study also notes that smoking level for women emerges as a specific EU problem as 
compared  to  other  world’s  regions.  In  some  EU  countries  prevalence  among  women  is 
higher than among men and/or has been decreasing at a slower pace. 

35 

 
 
 
 
 
 
 
 
Substitution to smokeless tobacco products is an issue of concern for some countries 

In  addition  the  smoking  prevalence  figures  do  not  reflect  the  possible  substitution  to 
smokeless  tobacco  products  and  notably  chewing  tobaccos  products  in  certain  Nordic 
countries47.  This is illustrated by the low smoking prevalence figure reported in Sweden, 
the only country where sale of snus  products is  legal.  Increasing consumption of snus48 
and chewing tobaccos in neighbouring countries has been reported. 

Concerns with affordability levels 

Affordability  is  the  other  key  indicator  for  tobacco  control.  The  study  found  that 
affordability of cigarettes and fine-cut tobacco has decreased in most EU countries over 
the last decade, primarily in connection with tax increase trends. The study nevertheless 
points out that the decreasing affordability trend has slowed down and even reversed in 
some Member States over the past three years, since the price level trend barely matched 
the income growth. 

In addition, the affordability of fine-cut tobacco, notably linked in some countries to the 
development of products known as 'volume tobacco' is still an area of concern despite the 
progressive increase of taxes foreseen under the Directive. 

Furthermore,  when  compared  to  affordability  levels,  the  comparison  between  Member 
States reflects a significantly different view than the usual comparison based on nominal 
tax rates. The figure below illustrates this situation. For instance, Romania, Hungary and 
Poland have low nominal prices for cigarettes49 while in purchasing power parities terms 
prices are actually more expensive than the EU average. Conversely, Austria, Denmark 
and  Luxemburg  feature  among  the  least  expensive  countries  for  buying  cigarettes  in 
purchasing power parities terms50.  

47 A link between the decreasing use of cigarettes and the increasing use of snus is difficult to establish, but 

the phenomenon should be considered nevertheless. 

48 Sale of snus is illegal in all the EU except Sweden but it is legal for foreign travellers  to buy snus (and 

carry back personally) for personal use 

49  The  weighted  average  retail  selling  price  is  calculated  as  the  ratio  between  the  monetary  value  of  all 
products  released  for  consumption,  based  on  the  retail  selling  price,  divided  by  the  total  quantity 
released for consumption. 

50  Purchasing  power  parities  (PPPs)  are  price  relatives  that  show  the  ratio  of  the  prices  in  national 

currencies of the same good or service in different countries. 

36 

 
 
 
 
 
                                                           
Figure 18. Affordability levels for cigarettes in the EU (EUR/ 1000 units) 

Source: EA study 2019. WAP=weighted average price; PPP= purchasing power parities 

5.2.  Efficiency 

The  section  on  efficiency  aims  at  studying  the  relationship  between  the  resources 
required  by  a  policy  intervention  and  the  changes  generated  by  the  intervention.  The 
functioning  of  the  Directive  in  terms  of  efficiency  was  assessed  on  the  basis  of  the 
following evaluation questions. 

Evaluation questions:   

To  what  extent  are  the  current  rates  and  their  structure  cost  effective  in  achieving  the 
desired results? Would it be possible to achieve the same results (benefits) at less costs?  

Is  there  potential  to  reduce  inefficiencies  or  simplify  the  rates  and  structures  of  excise 
duty applied to manufactured tobacco without undermining the intended objectives? 

37 

 
 
 
 
 
 
Limited regulatory burden 

The study finds that the nature and the scope of the measures introduced by the Directive 
has  had  limited  impact  in  terms  of  regulatory  burdens  for  both  public  authorities  and 
economic  operators.  Overall,  as  reported  in  the  public  consultation  carried  out  in  2018 
and the interviews during the study, such burden is considered by stakeholders acceptable 
and has not changed overtime.   

None  of  the  tax  authorities  consulted  was  in  the  position  to  quantify  the  direct  costs 
envisaged by the Directive for two main reasons: (1) they could not be extrapolated from 
the  general  functioning  of  the  national  tax  administration  and  ordinary  procedures  and 
practices, and (2) any ‘extra’ cost specifically related to the Directive were nonetheless 
deemed negligible.   

Figure 19. Assessment of regulatory burden by Member States’ administrations 

Source: EA study 2019 (24 national authorities responded to the questionnaire)  

The  regulatory  burden  borne  by  Member  States  authorities  is  actually  to  be  seen  in 
relation to the overall EU excise legislation (and not specifically related to the Directive).  
Compliance  costs  are  mainly  related  to  the  Horizontal  Directive  that  oversees  all 
arrangements  concerning  excise  systems  and  the  movement  of  excise  goods  overall  - 
including the Excise Movement Control System (EMCS). The costs have been analysed 
in 2017 in the report on the evaluation of the Horizontal Directive51. 

51 COM(2017) 184 final 

38 

 
  
 
 
 
 
 
                                                           
Legal uncertainties and room for improvement 

The  study  notes  that  there  is  room  for  further  improvement  of  the  current  situation 
addressing the legal  uncertainties (and the related transaction costs) stemming from the 
subjective  elements  of  the  Directive.  In  particular,  the  definition  of  ‘smoking  tobacco’ 
and the definition of cigarillos laid down in the Directive are a source of confusion for 
stakeholders as the terminology is different from that used in customs classification.  

These concerns had already been highlighted in the 2015 evaluation report. Furthermore, 
two  recent  CJEU  judgements52  addressing  the  definition  of  smoking  tobacco  and 
borderline cigarillos indicate that the uncertainty is still a source of friction. 

The EU provisions have been efficient in reducing the cost of decreasing smoking 
prevalence 

Comparing  direct  charges  (i.e.  the  tax  revenues)  with  smoking  prevalence  trends,  it 
emerges from the study that the revision of EU minima introduced by the Directive has 
led to a slight improvement of the cost-efficiency of fiscal policy with respect to potential 
reduction  of  social  costs  of  smoking.  The  study  compared  the  actual  cost-efficiency  of 
the  Directive  in  addressing  smoking  prevalence  with  an  hypothetical  scenario  in  the 
absence of the Directive by calculating an index representing the cost of one less smoker. 
The  results  confirm  that  the  increase  of  the  EU  minimum  rates  have  led  to  a  slight 
improvement of the overall efficiency. In other words, from a public health perspective, 
the  study  concludes  that  EU  provisions  have  been  efficient  in  reducing  the  cost  of 
decreasing  smoking  prevalence,  enhancing  the  benefits  in  terms  of  lives  saved  and 
reduced healthcare and productivity costs.  

Inefficiency of the Directive to embrace new products 

Finally,  the  current  tax  categorisation  is  inefficient  as  regards  the  treatment  of  ‘heated 
tobacco  products’  and  e-cigarettes.  The  uncertainty  on  the  fiscal  treatment  of  these 
products  with  different  rates  and  structures  as  illustrated  in  the  maps  below  (Figure  23 
and 26) creates inefficiencies and legal uncertainty. The difficulties with the cross border 
movements of these products result in a malfunctioning of the internal market.  

For  heated  tobacco  products  (HTP),  the  growth  in  the  number  of  players  and 
commercialisation  as  well  as  disparities  of  treatment,  affect  the  functioning  of  the  EU 
market and cause administrative burden. The study notes in particular that the disparities 
of  interpretation  and  approach  may  cause  administrative  issues  in  the  cross-border 
movement of products. The choice of some Member States for an ad hoc regime affects 
control and enforcement, while the decision to treat HTP similar to the category of “other 
smoking tobacco” may constraint Member States options. 

52 Judgment of 6 April 2017,  Eko-Tabak, C-638/15,  EU:C:2017:277; and judgment of 11 April 2019, C-

638/17, Skonis ir kvapas, EU:C:2019:316.  

39 

 
 
 
 
                                                           
Figure 20. Tax regulation of heated tobacco products in the EU (Q4 2017) 

   HTP commercialized 
    HTP non-comercialized 
 □    Non-harmonized category 
 _    Taxed as OST 

 *    Not yet decided/not available 
(*) not decided as end 2017 

Source: EA study 2019  

Figure 20 shows the picture of taxation of heated tobacco products as at the end of 2017. 
It  should  be  noted  that  new  products  are  being  launched  and  the  situation  is  evolving 
rapidly.  For  instance,  Italy  has  adopted  a  product-specific  approach  by  establishing  an 
equivalence  of  time  consumption  to  conventional  cigarettes  under  the  same  puffing 
conditions and applying a 50% reduction (that will significantly reduce in the course of 
2019); in Portugal there is a mixed approach with an ad valorem component, a specific 
component and a minimum excise; Hungary has a fully specific non harmonised tax per 
items (and not per weight). 

Other countries apply the tax regime of other smoking tobacco  (per weight  in  Kg, or  a 
mixed  structure).  The  United  Kingdom  has  created  in  2019  a  separate  tax  category  for 
HTP  with  a  rate  identical  to  fine-cut  tobacco.  The  Czech  Republic,  Lithuania  and 
Slovenia have also implemented a specific tax and apply rates corresponding to the level 
applied to fine-cut tobacco. Poland has also created a specific tax, with a mixed structure 
to be applied from July 2020. 

40 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The level  of fragmentation is  high and the lack  of harmonisation  is  creating significant 
obstacles to the smooth functioning of the internal market. 

Figure 21. Answers of national administrations in relation to heated tobacco products 

Source: EA study 2019, total number of respondents 24, multiple choices possible.  

The feedback  from  Member States during the study indicates that most  Member States 
prefer an EU-level harmonisation, with most Member States favouring a new category in 
the  Directive  so  as  to  reduce  the  administrative  burden  caused  by  the  current  highly 
fragmented legal and classification approaches between Member States. 

Figure 22. Answers of national administrations possible ways forward 

National administrations prefer: 

Harmonized category and minimum
rate

Inclusion in an existing category

Harmonized category only

15 

5 

3 

Non-binding guidance

1 

No EU intervention

0 

0

5

10

15

20

Source: EA study 2019, total number of respondents 24, several answers possible  

41 

 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
For e-cigarettes, each taxing country has created its own tax regime and implementing 
measures  resulting  in  a  significant  fragmentation  of  rules  across  the  EU.  Moreover, 
control of cross-border online sales is difficult.  

Figure 23. National, ad hoc tax regimes for e-cigarettes in the EU4 2017) 

No consumption tax 

Consumption tax 

€0.12/ml on all e-liquids 

€0.20 on all e-liquids 

€0.10/ml on all e-liquids 

€0.30/ml on all e-liquids 

CY 

EE 

EL 

FI 

HR 

0 rate 

HU 

IT 
(*) 

LV 

HUF 65/ml (ca. €0.18/ml) 
on nicotine liquids 

€0.08/ml on nicotine liquids 
and €0.04 on other e-
liquids. 

€0.01/ml of e-liquid and 
€0.005/mg of nicotine 

PL 
(**) 

PLN 0.5/ml (ca. €0.12/ml) 
on all e-liquids 

PT 
(*) 

RO 

€0.30/ml on nicotine liquid 

RON 0.5/ml (ca. €0.11/ml) 
on nicotine liquids 

SE 
(**) 

SEK 2/ml (ca. € 0.20/ml) 
on nicotine liquids 

SI 

€0.18/ml on nicotine liquids 

(*) Rates for 2019. (**) In Sweden, the tax is applicable since 
July 2018 and in Poland since January 2019. 
Source: EA study 2019 

The  situation  is  evolving  regularly  reflecting  market  and  regulatory  developments.  For 
example, Lithuania introduced an excise duty for electronic cigarette in 2019 (0.12 EUR 
per millilitre of product). 

The feedback from Member States during the study indicates a strong preference for EU 
level  harmonisation  for  the  tax  regime  of  e-cigarettes  as  different  regimes  prevent 
monitoring and control of cross border trade.  

42 

 
  
 
 
 
 
 
 
 
Figure 24. Replies of national administrations on e-cigarettes consultation 

A: Reason for taxing e-
cigarettes at national level 

B: Reason for not taxing e-
cigarettes at national level 

Monitoring

11 

Should be done at EU level

Fair competition

Tax revenues

Protect health

Protect minors

9 

8 

7 

5 

Not enough data

It is not tobacco

Not worth the effort

Control is difficult

9 

7 

5 

5 

3 

0

2

4

6

8

10

12

0

2

4

6

8

10

C: For e-cigarettes, national 
administrations prefer: 

Harmonized category and
minimum rate

19 

Harmonized category only

2 

No intervention

Non-binding guidance

1 

1 

0

5

10

15

20

Source: EA study 2019. 11 national administrations answered to the first question (those who were taxing 
e-cigarettes at the moment of the survey), 12 national administrations answered to the second question, 
and 23 national administrations replying to the survey answered the third question.    

43 

 
 
 
 
 
 
 
 
 
 
5.3.  Coherence 

External  coherence  looks  at  how  well  the  Tobacco  Excise  Directive  is  integrated  and 
compatible  with  other  related  EU  policies,  most  notably  tobacco  control  policies  and 
further  policy  developments  and  international  agreements  in  place.  This  section  also 
analyses the internal coherence of the Directive looking at how the various provisions of 
the Directive operate together to achieve its objectives. 

The functioning of the Directive in terms of external coherence was assessed on the basis 
of the following evaluation question: 

Evaluation question: Are the rates and structures of excise duty applied to manufactured 
tobacco coherent with other EU policies and international obligations? 

As  indicated  in  section  1,  the  Directive  is  part  of  a  broader  EU  policy  framework  that 
includes  among  others  the  EU  excise  and  customs  framework  with  the  general  excise 
duty legislation and the customs union  legislation, tobacco control policies and notably 
the  Tobacco  Product  Directive,  and  the  policies  against  illicit  trade  and  tax  fraud. 
Additionally, the EU is  party to  the WHO Framework Convention on Tobacco Control 
where tax measures play a major role.  

Coherence between the EU excise and customs framework could be enhanced 

The  results  of  the  study  indicate  that  the  Directive  is  broadly  coherent  with  the  overall 
principles and policies governing the Single Market.  

A possibility to  enhance the coherence between  the EU excise and customs  framework 
could  be  further  explored.  As  already  seen  in  previous  evaluation  reports,  the  study 
highlights  again  the  opportunity  to  fix  issues  concerning  the  definitions  of  ‘smoking 
tobacco’ and ‘cigarillos’. It should be noted that contrary to other excise goods, there is 
no reference in the Directive to the Combined Nomenclature (CN classification) used for 
customs  purposes.  In  some  cases  this  actually  might  give  rise  to  the  application  of 
different terminology as reported under the efficiency section.  

The negative impact of cross border traffic and the necessity to ensure coherence 
with the Horizontal Directive 

As seen under the effectiveness criteria, the level of cross border traffic has a significant 
impact  on  excise  duty  revenues,  notably  for  some  Member  States.  In  addition,  for 
particular  flows  the  abnormal  level  of  trade  can  put  at  risk  the  public  health  objectives 
adopted by some Member States.  

The scope of the tobacco tax Directive does not cover the levels of cross border traffic. 
However, the lack of convergence of taxes (hence prices) and the resulting importance of  

44 

 
 
 
 
 
trade for some bi-lateral flows questions the coherence with Article 32 of the Horizontal 
Directive on cross-border acquisitions by private individuals. 

The  general  rule  is  that  excise  duties  are  applied  in  the  country  of  release  for 
consumption. As derogation from this general rule, and in accordance with the principle 
governing the internal  market,  Article 32 of the  Horizontal Directive establishes that in 
the case of excise goods acquired by a private individual for his own use, and transported 
from  one  Member  State  to  another  by  him,  the  excise  duty  of  the  country  of  purchase 
applies.  

The  Horizontal  Directive  provides  criteria  that  Member  States  should  at  least  take  into 
account to determine whether the goods are for the private individual’s own use:  

 

 

the  commercial  status  of  the  holder  of  the  excise  goods  and  his  reasons  for 
holding them; 
the  place  where  the  excise  goods  are  located  or,  if  appropriate,  the  mode  of 
transport used; 

  any document relating to the excise goods; 
 
 

the nature of the excise goods; 
the  quantity  of  the  excise  goods  (Member  States  cannot  set  guide  levels  below 
certain quantities indicated in Article 32(2) of the Horizontal Directive). 

The  transitional  period  foreseen  in  Article  10(2)  of  the  tobacco  tax  Directive  allowed 
some  Member  states  a  delay  to  reach  the  minimum  overall  excise  duty  levels  for 
cigarettes.  To  accommodate  for  the  imbalance  during  that  period,  where  the  minimum 
excise was not reached, a transitional measure was introduced in the Horizontal Directive 
under  the  repealed  Article  46(3)53  to  allow  for  the  restriction  of  the  amount  of  tobacco 
that  travellers  could  bring  for  private  use  from  these  countries  under  derogation  to  the 
rest of EU. The stricter restrictions were designed to mitigate the risk of possible adverse 
effects  on  cross-border  flows  of  products.  These  restrictions  have  been  lifted  since  1st 
January 2018, with the end of the transitional period. 

Yet the divergence in tax levels remains high, and therefore the potential for high level of 
cross  border  flows  derogating  to  the  general  principle  of  excise  duty  to  be  paid  in  the 
country of consumption.  

As  already  seen  under  the  effectiveness  evaluation  criteria,  excise  duty  convergence 
envisaged  by  the  Directive  is  far  from  becoming  a  reality  and  considerable  divergence 
between Member States remain creating an incentive for economic driven non-domestic 
purchases.  The  prices  differences  are  sufficiently  high  to  justify  not  only  purchases  for 
private consumption by tourists or travellers but also to ensure an economic profit in case 
of illicit reselling or travelling for the sole purpose of buying cigarettes. 

53 During that period, affected Member States could apply a quantitative limit of no less than 300 cigarettes 

rather than of 800 cigarettes. 

45 

 
 
 
 
                                                           
An external study on the implementation of Article 32 and 36 of the Horizontal Directive 
is underway. This study will notably look at the acquisition and movements of duty-paid 
products by private individuals, including tobacco products.  

The  emphasis  on  the  public  health  objective  and  synergies  with  tobacco  control 
policies deserves better attention  

A previous revision of the tobacco tax Directive in 2002 already referred to public health 
as  an  objective.  Although  the  public  health  is  one  of  the  two  main  goals  explicitly 
mentioned in the current Directive, the historical focus of the tobacco tax Directive was 
still seen as primarily relating to the proper functioning of the single market.  

The  emphasis  on  the  public  health  objective  deserves  better  attention  as  taxation  is 
recognised as the most effective tool to influence behaviour regarding the use of tobacco 
products.   

As  for  the  overall  alignment  with  the  WHO  policy,  the  Directive  has  taken  up  the 
Framework  Convention  on  Tobacco  Control  guidelines’  recommendations  on  effective 
tax  policies.  However,  the  overall  excise  tax  targets  that  the  WHO  recommends  (an 
overall  excise  duty  share  of  70%  of  the  retail  price  for  tobacco  products)  may  still  be 
challenging.  In  addition,  the  alignment  and  coherence  should  be  seen  in  perspective  of 
the  ambitious  (and  voluntary)  WHO  target  of  30%  of  reduction  by  2025  of  smoking 
prevalence. 

There  is  room  for  further  integration  and  synergies  with  other  tobacco  control  policies 
notably public health policies and the fight against cancer, and the policies against illicit 
trade and tax fraud. 

Recent policies adopted in Finland, France or the Netherlands are examples of coherent 
tobacco  tax  policies  are  designed  as  part  of  a  coherent  package  of  tobacco  control 
policies.  

The Finnish law on Excise Duty on Tobacco  54 refers to health objective in the Article 1 
of  the  law:  “The  purpose  of  the  tobacco  excise  is  to  promote,  among  other  things,  the 
goals  for which it is  prescribed in  the  Tobacco  Act”. Article 1 of the referred Tobacco 
Act  55  reads:  “The  purpose  of  this  law  is  to  stop  the  use  of  tobacco  products  and  other 
nicotine-containing  products  that  contain  toxic  substances  for  humans  and  cause 
dependence”. 

The law on excise duty on tobacco has as objective to lower the consumption of tobacco 
products (total and not only domestic sales), meaning for example optimizing from this 
perspective the level of taxation and the tax structure of each tobacco product.  

54 Finnish law on Excise Duty on Tobacco   
55 Tobacco Act  

46 

 
 
 
 
                                                           
The  coalition  agreement  of  the  Dutch  government  made  in  2017  explicitly  states  "We 
support  the  goal  of  creating  a  smoke-free  generation  and  will  therefore  increase  excise 
duty  on  tobacco.”56.  A  national  prevention  agreement  (“Nationaal  Preventieakkoord”)57 
was  then  concluded  in  November  2018  between  various  partners  and  the  Ministry  of 
Health on the prevention of smoking, obesity and problematic alcohol use. With respect 
to tobacco, the goal of the agreement is to have a “smoke-free” generation in 2040. One 
of  the  planned  measures  mentioned  in  the  agreement  concerns  the  excises  on  tobacco 
foreseeing  regional  coordination  with  neighbouring  countries  to  address  the  risk  of 
increase cross-border shopping. 

The  French  government  announced  in  June  2017  its  political  ambition58  to  reduce 
tobacco smoking and bring the price of a pack of cigarettes to 10 Euro. In parallel, as a 
safeguard, it insisted on the need to fight fraud. The 2018 law59 for financing the social 
security foresees five stages of tax hike to increase prices. 

Coherence with the Tobacco Product Directive to be further fine-tuned 

Since the adoption of the Directive,  a number of regulatory changes happened, notably 
with  the  entry  into  force  of  the  second  Tobacco  Products  Directive60.  The  Tobacco 
Products Directive aims to improve the functioning of the internal market for tobacco and 
related products, while ensuring a high level of health protection for European citizens. 
The  Directive  entered  into  force  on  19  May  2014  and  became  applicable  in  the  EU 
Member States on 20 May 2016.  

The Tobacco Products Directive lays down rules governing the manufacture, presentation 
and sale of tobacco and related products. These include cigarettes, roll your own tobacco, 
pipe  tobacco,  cigars,  cigarillos,  smokeless  tobacco,  electronic  cigarettes  and  herbal 
products  for  smoking.  The  overall  objective  of  the  Directive  is  to  facilitate  the  smooth 
functioning of the internal market for tobacco and related products, to ensure high level 
of human health protection, especially for young people, and to meet the obligations of 
the Union under the WHO Framework Convention for Tobacco Control. In this respect 
the goal of the tobacco product Directive is to reduce the numbers of tobacco users with a 
particular focus on discouraging young people from taking up smoking and to ensure that 
citizens across the EU are fully aware of the harmful effects of tobacco use. 

Notably  new  definitions  of  tobacco  products  have  been  introduced  and  coherence  with 
definitions in the taxation Directive would need to be further fine-tuned.  

56 Dutch coalition agreement 
57 Dutch national prevention agreement  
58 Prime Minister 2017 general policy statement  
59 Finance act of December 2018  
60 Directive 2014/40/EU 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 (OJ L 127, 29.4.2014, p. 1–38) 

47 

 
 
 
 
                                                           
Another key element of the Tobacco Product Directive is the introduction of an EU-wide 
tracking and tracing system for the legal supply chain. This system with a security feature 
composed  of  visible  and  invisible  elements  (e.g.  holograms)  aims  to  help  law 
enforcement bodies, national authorities and consumers detect illicit products.  

The entry into force of the track and trace system for cigarette packs and roll-your-own in 
20  May  201961  call  for  continuing  to  ensure  the  coherence  between  the  regulatory 
frameworks, and notably the Excise Movement Control System (EMCS).   In particular, 
the modern track and trace system can contribute to effective controls as ambitioned by 
the Customs Union framework and will also assist in the global fight against tax fraud. 

Under  the  traceability  system,  all  unit  packets  of  tobacco  products  are  required  to  be 
marked with  a unique identifier.  It  will be possible to  track and trace the  movement  of 
legal  tobacco  products  to  allow  public  authorities  to  determine  when  a  product  was 
diverted into the illicit market. 

Large room for strengthening synergies with policies to fight illicit trade 

As regard coherence with illicit trade, the study notes that there is limited explicit cross-
references  between  the  Directive  and  the  EU  policy  against  illicit  trade  and  tax  fraud. 
There  is  significant  room  for  strengthening  connections  and  synergies.  The  study  also 
notes the need to deepen the analytical part of the impact of taxation on illicit trade with 
robust independent data.  

The  parties  to  the  Framework  Convention  on  Tobacco  Control  adopted  in  November 
2012 a Protocol to Eliminate Illicit Trade in Tobacco Products. This Protocol builds on 
Article  15  of  the  Framework  Convention  and  sets  the  rules  for  combating  illegal  trade 
through control of the supply chain and international cooperation.  

The introduction of the Track and Trace system for cigarettes in May 2019 is expected to 
contribute to a better monitoring of the flows of cigarettes. However the upstream part of 
the supply chain (i.e. from raw tobacco to the manufacturing site) is left without effective 
control. The lack of control of the supply chain notably for raw tobacco and the risk of 
fiscal evasion due to the growing illicit production of cigarettes within the EU remains a 
constant problem.  

This analysis was further confirmed in a dedicated workshop on raw tobacco with experts 
from Member States62.  As noted above under the section on effectiveness, there was a 
general consensus among experts from customs and taxation authorities on the high level 
of illicit trade of bulk tobacco, the increase illicit manufacturing activities, and the active 
presence of organised crime organisations in this area. 

61 See tracking and tracing systems. The system for all other tobacco products is planned for 2024. 
62 Fiscalis workshop on raw tobacco with experts from Member States, Budapest, June 2019 

48 

 
 
 
 
 
                                                           
Experts noted that flanking measures should be designed in parallel to the adoption of tax 
policies  to  take  into  account  the  needs  and  challenges  of  effective  control  and 
enforcement  notably  through    education  policies,  resources  for  enforcement  efforts  and 
coordination at regional level. 

Coherence with environmental policy 

At  global  level,  finally,  the  environmental  impact  of  tobacco  is  also  getting  more 
attention  and  the  World  Health  Organization  published  recently  a  study  on  tobacco’s 
environmental footprint across its entire supply chain63.  The study concludes that every 
stage  in  the  global  tobacco  supply  chain  involves  considerable  resource  inputs,  and 
results  in  the  production  of  wastes  and  emissions.  The  environmental  damage  that 
tobacco cause makes it incompatible with the global development agenda. 

The  European  Commission  has  identified  tobacco  filters  among  the  top  five  most 
common pieces of litter found on beaches64. With the adoption of the single use plastics 
Directive  and  the  introduction  of  an  Extended  Producer  Responsibility  scheme 
manufacturers are expected to cover the costs of waste management and clean-up, as well 
as awareness raising measures for tobacco products with filters (such as cigarette butts). 
The  single  use  plastics  Directive65  also  foresees  that  Member  States  should  promote  a 
wide range of measures to reduce litter from post-consumption waste of tobacco products 
with filters containing plastic. 

Coherence within the tobacco taxation Directive 

Internal  coherence  between  provisions  in  the  Directive  has  already  been  highlighted  in 
previous reports66.  For example ‘borderline’ cigarillos which have some characteristics 
similar  to  cigarettes  (e.g.  dimension,  filter,  packaging,  etc.)  but  can  be  sold  to  a  much 
lower price thanks to a more favourable tax treatment.  

Other  issues  to  be  addressed  are  the  uncertainty  around  the  implementation  of  the 
Minimum  Excise  Duty  (MED)  and  the  calculation  and  reporting  of  the  Weighted 
Average Price.  

The  MED  provisions  appear  to  be  not  always  coherent  with  other  provisions  of  the 
Directive. There is no ceiling to the MED, but there is an obligation to respect the ‘mixed 
structure’  requirements.  However,  this  provision  is  interpreted  differently  between 
Member States leading to non-uniform views and practices concerning the upper limit of  

63 An assessment of tobacco’s global environmental  footprint, WHO FCTC Global Studies Series 2018 
64 single use plastics impact assessment, SWD(2018) 254 final 
65 Directive (EU) 2019/904 (OJ L 155, 12.6.2019, p. 1–19) 
66 See Commission Report COM(2015)621 final and Commission Report COM(2018)17 final 

49 

 
 
 
 
 
                                                           
the  MED.  The  discrepancy  in  the  interpretation  of  MED  provisions  is  potentially 
distortive for the functioning of the internal market.  

The consultation of tax authorities confirmed the existence of legal uncertainties with this 
provision  and  the  demand  for  clarifications  to  remove  the  current  disparities  of 
implementation  while  preserving  the  overall  flexibility  of  this  mechanism.  As  noted  in 
the  Commission  2018  report,  clarification  may  become  necessary  to  allow  Member 
States  to  make  use  of  this  provision  against  low  price  cigarettes  in  a  more  efficient 
manner67. 

The lack of internal coherence between the requirement for Member States to apply an 
overall excise duty of at least 60% and the provisions leading to its calculation has been a 
source of confusion. Article 10(2) of the Directive stipulates that the overall excise duty 
on  cigarettes  must  represent  at  least  60%  of  the  weighted  average  retail  selling  price 
(WAP)68. However, Member States have until 1 March of each year to calculate the WAP 
and where the  rise of the WAP  results  in  a decrease of the excise duty  below the 60% 
minimum  requirement,  the  discretion  left  to  Member  States  to  delay  the  change  of  the 
rates  under  Articles  11(1)  and  18(2)  can  lead  to  a  recurrent  situation  where  a  Member 
State actually complies only for a short time each year with the 60% requirement.  

Finally,  the  reporting  system  in  view  of  the  requirement  of  Article  19  of  the  Directive 
could  be  made  more  consistent  with  the  arrangements  foreseen  by  the  implementing 
regulation  as  regards  data  to  be  reported  by  Member  States  to  the  Commission69.  The 
information  collection  on  the  national  implementation  of  the  Directive  is  important  to 
ensure  that  the  Commission  has  sufficient  information  on  the  national  tobacco  taxation 
structures for monitoring and assessing its performance in the future.  

As noted in the study, there is room to improve the monitoring of market developments.  
It  is  important  to  ensure  a  more  coherent  and  consistent  reporting  of  market  data  and 
statistics.  The  provision  of  the  current  requested  data  should  be  timely  and  further 
consideration should be given to expanding the data that must be provided. 

5.4.  Relevance 

This  section  of  the  analysis  aims  to  analyse  the  current  needs  of  Member  States  (tax 
administrations  and  public  health  authorities),  economic  operators,  NGO's  and  citizens 
compared to the objectives the Directive was designed to address. The ‘relevance’ of the 
EU minima regards the extent to which the rates laid down in the Directive are (still) able 
to  produce  an  effect  on  the  excise  duty  levels  applied  in  Member  States,  thereby  

67 See Commission report COM (2018)17 final 
68 Member States which levy an excise duty of at least EUR 115 per 1 000 cigarettes need not to comply 

with the 60% requirement. 

69  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 

50 

 
 
 
 
 
                                                           
contributing to the overall policy objectives. The functioning of the Directive in terms of 
relevance was assessed on the basis of the following evaluation questions. 

Evaluation questions:  

Do  the  current  minimum  rates  and  structures  still  correspond  to  the  objectives  of  the 
Directive? Do they correspond to the needs of the national tax administrations, ministries 
of  health  and  subsequently  of  other  stakeholders  (economic  operators,  NGO's  and 
citizens)?  

The EU minima rates have lost their traction 

The minimum rates laid down in the Directive have not or limitedly changed over some 
few years and have therefore lost their traction on most of Member States fiscal policies. 
Since 2018, most Member States have reached the prescribed minimum tax levels so the 
current provisions have become of little relevance for the way forward. The only partial 
exception regards fine-cut tobacco for which the last stage of increase of EU minima is 
scheduled in 2020.  

Similarly, provisions for the excise structure are based on the original design of the EU 
tobacco taxation framework in the seventies and have progressively lost their relevance. 
The  policy  objectives  underlying  convergence  in  tax  rates  and  harmonisation  of 
structures  between  Member  States  should  be  reconsidered,  since  they  might  no  longer 
correspond  to  countries  priorities  for  the  near  future.  In  addition,  they  appear  to  be 
irrelevant in view of the high levels of cross border shopping as noted above. 

On  all  these  matters  the  external  study  notes  that  the  positions  of  stakeholders  are  not 
univocal, in particular not all tax authorities consider the current minima as outdated, and 
a  few  of  them  do  not  find  the  status  of  novel  products  as  problematic.  This  is  also  the 
position  of  the  majority  of  economic  operators,  whereas  the  majority  of  public  health 
stakeholders conversely consider the current provisions as no longer useful. 

As  for  the  relevance  of  the  overall  impact  of  excise  duty,  the  ‘total  tax  burden’  (TTB) 
indicator, which is the tax applicable at the weighted average price level(WAP), inclusive 
of  VAT  may  provide  a  more  realistic  picture  of  the  tax  incidence  on  price  in  a 
comparative  perspective.  The  total  tax  incidence  ranges  from  as  low  as  69%  in 
Luxemburg up to 87% in Greece and 86% in Finland.  

The study notes that cigars, cigarillos and other smoking tobacco account for only 3.5% 
of the expenditure on smoking tobacco in the EU (ranging from as low as 1% to less than 
9% at country level) and this percentage has been declining steadily overtime (except for 
water-pipe tobacco). Still, the EU minima for these products have not changed for many 
years and have therefore become irrelevant for almost all Member States due to inflation 
and income growth. 

51 

 
 
 
 
The Directive is not fit for market developments 

Another dimension where the Directive seems no longer ‘fit for purpose’ is the unclear 
status  of  novel  products,  namely  for  heated  tobacco  products  and  e-cigarettes  (see  also 
efficiency section).  

In the same way, the current  scope of the Directive cannot  address  the development  of 
the next generation of products already coming into the market. These addictive products 
can be substitute to cigarettes and contain nicotine or cannabidiol (CBD), notably used in 
e-liquids  intended  to  be  smoked  for  recreational  purposes,  regardless  of  whether  it  is 
synthesised or extracted from plants. 

The lack of a proper definition and classification in the tobacco tax Directive of heated 
tobacco  products  and  e-cigarettes,  and  in  the  future  for  next  generation  products  is 
becoming  an  issue.  Apart  from  potential  substitution  and  possible  concerns  of  lost 
revenues, this lack of harmonised definition and classification limits the possibilities of 
monitoring and controls. Monitoring is needed to enable verification and authentication 
of these products as well as the possibility to identify illicit trade, evasion and abuse in 
the internal market. 

5.5.  EU added value 

This evaluation criterion examines the developments that have resulted from EU policy 
intervention represented by the tobacco tax Directive, compared to what could have been 
delivered  by  national  actions  of  Member  States  or  no  action.  The  functioning  of  the 
Directive  in  terms  of  EU  added  value  was  assessed  on  the  basis  of  the  following 
evaluation questions. 

Evaluation questions:  

What  is  the  additional  value  of  the  minimum  rates  and  structures  of  Directive 
2011/64/EU, compared to what could have been expected from Member States acting on 
national level?  

Is EU intervention in this area still justified? 

The study finds that the revised EU minima have raised cigarettes and fine-cut tobacco 
price levels in some Member States more than what would have happened in the absence 
of  the  Directive.  Such  additionality  was  greater  for  the  fixed  minimum  amount 
requirement  than  for  the  overall  minimum  impact  requirement.  However,  such  effects 
appear of fairly limited magnitude and regard only a few EU countries.  

By  consequence, the study concludes that the Directive has contributed to reducing the 
consumption of tobacco products and smoking prevalence in the EU, although the extent 
of such contribution is limited (some 0.25 million fewer smokers in the 2011-17 period).  

52 

 
 
 
 
 
Coherently, most public health authorities of the Member States are not satisfied with the 
impact of the Directive on tobacco control targets and call for bolder fiscal measures.  

Table 4. Public health authorities’ satisfaction with the effectiveness of the Directive (shortcomings) 

A) Question: If trends were not in line 
with expectations / policies or plans, 
please indicate whether this was mostly 
due to taxation or other factors 

B) Question: If insufficient taxation 
was a cause of unsatisfactory reduction 
of smoking prevalence, to what extent 
can this failure be attributed to 
ineffective EU excise legislation? 

Unsatisfactory results were mostly 
caused by insufficient taxation 

Unsatisfactory results were partly 
caused by insufficient taxation 

1  High extent 

9  Moderate extent 

Unsatisfactory results were mostly 
caused by factors other than taxation 

0 

Modest extent 
Not at all 

Don’t know 
Source: EA study 2019 (15 national public health authorities responded to the questionnaire)  

1  Don’t know 

2 

5 

2 
0 

1 

The position of tax authorities is mixed: on the one hand there is a general recognition of 
the added-value of the EU tobacco excise legislation and the need to maintain it, on the 
other hand there is at the moment no consensus on convergence of price levels and cross-
border shopping. 

Table 5. Public health authorities’ satisfaction with the effectiveness of the Directive (results achieved) 

Question: One of the main objectives of the EU tobacco excise legislation is to 
reduce differences in the tax regimes applied to tobacco products across Member 
States. How do you rate the results achieved in this respect in the period 2011-2017? 
Don't 
know 

Somehow 
significant 

Quite 
significant 

Not 
significant 

Very 
significant 

Reduction of differences in 
tax levels of cigarettes 
across the whole EU    

Reduction of differences in 
the tax levels of cigarettes 
in your country’s 
geographical region        

Reduction of differences in 
the tax levels of fine-cut 
tobacco in your country’s 
geographical region        

1 

3 

2 

5 

5 

5 

8 

5 

6 

10 

6 

6 

0 

3 

3 

53 

 
 
 
 
 
 
Harmonisation of excise 
duty structures for 
cigarettes (the mix of ad 
valorem and specific 
component) 
Harmonisation of excise 
duty structures for other 
tobacco products 

Coherence in the 
classification of tobacco 
products across the EU, 
based on the harmonised 
categories  

3 

2 

2 

6 

4 

7 

10 

11 

5 

Harmonisation of tax 
collection mechanisms  
Source: EA study 2019 (24 national tax authorities responded to the questionnaire)  

2 

3 

7 

5 

4 

4 

2 

3 

4 

2 

10 

54 

 
 
 
 
6.  Conclusions 

Based on the evaluation criteria examined in the previous chapter, the conclusions can be 
summarised as follows: 

  As  for  effectiveness,  the  overall  benefits  on  market  functioning  (including 

substitution of fine-cut tobacco) have reduced overtime. 

As regards the objective to ensure the proper functioning of the internal market, The 
Directive  provisions  on  minimum  excise  rates  have  been  moderately  effective  in 
raising tax rates and prices in Member States. 

There is no ‘convergence’ of tax levels, but the EU minima helped to avoid an even 
greater disparity across the EU. 

The lack of convergence in rates across the EU generates in some cases high levels of 
unintended cross-border flows. This lack of convergence is to be seen together with 
the difficulties of enforcing the concept of personal use as foreseen by Article 32 of 
Directive  2008/118/EC  (guidance  to  what  quantity  of  excise  good  a  private  person 
can transport over the border for its own use). The loss of tax revenues is significant 
for some Member States while others register considerable  extra revenue compared 
with  local  consumptions.  In  addition,  this  is  a  major  concern  to  the  public  health 
objectives adopted by a number of Member States. 

The  relative  level  of  illicit  trade  has  slightly  declined  over  the  years  but  remains 
substantial  and  a  source  of  concern  which  calls  for  increased  synergies  with 
enforcement policies. The deviation of raw tobacco to illicit manufacturing within the 
EU is a growing concern for most Member States. 

As  regards  the  objective  to  reach  a  high  level  of  health  protection,  the  Directive 
contributed to the decline of smoking prevalence but only to  a certain level and the 
smoking prevalence levels remain higher than expected.  

  As regards efficiency, the consultation with stakeholders indicates that the regulatory 
burden is not an issue for Member States authorities nor for operators.  Compliance 
costs  are  actually  mainly  related  to  the  Horizontal  Directive  that  oversees  all 
arrangements concerning excise systems and the movement of excise goods overall. 
None of the tax authorities consulted was in the position to quantify the direct costs 
envisaged  by  the  Tobacco  Tax  Directive.  There  remain  however  legal  uncertainties 
that would need to  be addressed including the definition of smoking tobacco or the 
Minimum Excise Duty. 

  As  for  coherence,  it  can  be  concluded  that  Directive  2011/64/EU  is  generally 
coherent  with  international  policies  (i.e.  Framework  Convention  on  Tobacco 
Control).  However,  as  regards  coherence  with  other  EU  legislation,  there  is 
significant room for improving synergies, notably with the public health framework  

55 

 
 
 
 
 
 
and the fight against illicit trade. Finally, the lack of internal coherence among some 
provisions of the Directive is a source of concern. 

  The  relevance  of  the  Directive  has  diminished  overtime  and  is  no  longer  fit  for 
purpose.  The  EU  minima  remain  have  now  lost  their  traction  effects  which  would 
contribute to a more ambitious achievement of the objectives of the Directive (public 
health and upwards convergence). The current provisions (minimum rates, structures, 
and  tax  categories)  are  therefore  no  longer  relevant  to  address  future  challenges,  in 
particular, for products such as e-cigarettes and heated tobacco products, and the new 
products coming into the market.  

  As for the EU added value, the contribution  to  harmonising  fiscal  classification of 
products  so  far  has  been  important.  However,  the  direct  contribution  on  tobacco 
control appears limited and most public health authorities of the  Member States are 
not satisfied with the impact of the Directive on tobacco control targets and call for 
stronger fiscal measures. 

In view of the above findings and in  particular the lack of  effectiveness, relevance and 
coherence of the Directive, the main challenges with the implementation of the Directive 
are: 

  Re-conciliating the key objectives of the Directive: 

The  main  challenge  emerging  from  the  evaluation  of  the  Directive  is  the 
(re)conciliation  of its two main objectives “to  ensure the functioning of the internal 
market  and at  the same  time a high level  of health protection”. The main source of 
confusion lies with the ambivalence between the so-called internal market objective 
and the public health objective. The disparity of taxes (hence prices) is allowing for a 
very  lucrative  and  easy  trade  of  cheaper  tobacco  products  across  borders  inside  the 
EU.  This  is  not  what  was  intended  under  the  Directive  objective  “to  ensure  the 
functioning  of  the  internal  market  and  at  the  same  time  a  high  level  of  health 
protection”.  

As seen above, it would be illusionary to expect that the convergence of prices would 
materialise in the near or longer future without further action at EU level. 

  The need to upgrade the regulatory framework to tackle new market challenges  

For recent  and new products  the lack of harmonisation is  a source of concern  from 
the internal  market  perspective. On the market  side, developments  have  accelerated 
within  new  e-cigarettes,  heated  tobacco  products  and  a  new  generation  of  modern 
products  is  coming  into  the  market  (containing  nicotine  or  cannabis).  In  particular, 
the  current  scope  of  the  Directive  is  not  capable  of  providing  for  an  explicit 
harmonised taxation regime for e-cigarettes and heated tobacco products. As a result  

56 

 
 
 
 
 
 
 
Member  states  have  established  some  taxation  on  these  products  but  with  different 
structures.  The  current  lack  of  harmonisation  of  the  tax  regulatory  framework  for 
these products is also restricting the possibility to monitor their market development 
and control their movements.  

  The need for a holistic approach to enhance coherence  

The  evaluation  shows  a  low  degree  of  coherence  of  the  Directive  with  other  EU 
policies  and  the  need  to  develop  synergies.  There  is  a  need  to  have  a  more 
comprehensive and holistic approach, taking on board all aspects of tobacco control 
including  public  health,  taxation,  the  fight  against  illicit  trade  and  environmental 
concerns.    More  coherence  is  also  needed  in  view  of  the  EU  agenda  in  the  fight 
against cancer.  

57 

 
 
 
 
ANNEX 1: PROCEDURAL INFORMATION 

1.  Lead DG, Decide Planning/CWP references 
Title 

Agenda Planning Reference 
AP N° 
PLAN/2017/1028 

Evaluation of Council Directive 
2011/64/EU  

Foreseen adoption 

November 2019 

2.  Organisation and timing 

The Inter-Service Steering Group (ISSG) was set up in 2018 and included the following 
DGs and Services: SG, SJ, AGRI, JRC, OLAF, SANTE, TAXUD.  

Five  meetings  were  organised  between  May  2018  and  October  2019.  The  feedback  on 
the external study received from these Directorate Generals and services has been taken 
into account.  

Further consultations with the ISSG were carried out by e-mail. The ISSG approved the 
Evaluation and Fitness Check Roadmap. The ISSG also discussed the main milestones in 
the  process,  in  particular  the  consultation  strategy  and  main  stakeholder  consultation 
activities, the terms of reference for the external support study, key deliverables from the 
support study, and the draft evaluation report. 

3.  Evidence, sources and quality 

The  starting  point  for  the  drafting  of  the  evaluation  report  was  the  report  of  a  support 
study  prepared  for  the  Commission  by  Economisti  Associati.  Information  provided  by 
the  stakeholders  through  the  stakeholder  consultation  activities  were  another  source  of 
information (see Annex 2).  

58 

 
 
 
 
 
ANNEX 2: STAKEHOLDER CONSULTATION 

Objective and scope 

The  overall  objective  of  the  consultation  with  stakeholders  was  to  gather  factual 
information,  data,  knowledge  and  perception  about  the  current  tobacco  taxation  in  the 
EU,  as  well  as  on  novel  products  (e-cigarettes  and  heated  tobacco  products)  and 
appropriate options for a possible revision of Council Directive 2011/64/EU. 

Consultation strategy and stakeholder identification  

As a first step, it was necessary to identify stakeholder groups who might be concerned 
by the current Directive and possible future amendments of the Directive. The following 
stakeholders' categories were considered relevant for the evaluation:  

  Public authorities: national governments have a major role on the functioning of 
the  Directive  in  practice  with  the  responsibility  of  the  implementation  and 
enforcement.  Especially  tax  authorities  (enforcement),  ministries  of  finance 
(revenue)  and  ministries  of  health  (health  effects  of  excise  duties  on  tobacco) 
have a high interest. Due to the fact that harmonisation of national legislation on 
indirect taxation has to be agreed by the Council according to the unanimity rule, 
national  governments  have  also  a  large  influence  on  the  (re)design  of  the 
Directive.  

  Industry/business/associations: This stakeholder group, active on the market of 
manufactured tobacco products covered by the Directive, has a high interest in the 
Directive.  Operators  releasing  manufactured  tobacco  products  for  consumption 
are liable for the excise duties. They are affected by all subjects of the Directive, 
structure  of  rates,  minimum  rates,  definitions,  collection  of  excise  duties, 
exemptions,  derogations,  refunds  etc.  For  the  same  reasons,  associations 
representing  the  interests  of  the  industry  will  also  have  a  high  interest  in  the 
Directive. Amending the scope of the Directive might limit or extend the group of 
affected stakeholders. This group also includes operators involved in the industry 
value-chain, such as retailers, growers and processors.  

  NGOs: NGOs active in the health area have an interest in the Directive because 
the  Union's  fiscal  legislation  on  tobacco  products  needs  to  ensure,  besides  the 
proper  functioning  of  the  internal  market,  a  high  level  of  health  protection.  A 
certain  degree  of  convergence  between  the  tax  levels  applied  in  the  Member 
States  could  be  helpful  to  reduce  fraud,  smuggling  and  ensure  a  high  level  of 
protection  of  human  health  within  the  EU.  Also,  the  level  of  taxation  plays  an 
important  role  in  the  price  of  tobacco  products  which  influences  consumers' 
smoking habits.  

59 

 
 
 
 
 
  Citizens/General  Public:  The  general  public  is  the  largest  stakeholder  group. 
Even  if  not  directly  affected  by  the  Directive,  the  structure  and  level  of  excise 
duties  and  the  scope  of  the  Directive  indirectly  affects  the  general  public.  The 
level of taxation plays an important role in the price of tobacco products.  

Consultation tools 

The Directive has already undergone in 2017 an open public consultation in the context 
of  the  previous  Impact  Assessment  Study  (EA  2018).  The  2017  consultation  covered 
primarily the possible introduction of new harmonised categories for new products  and 
raw  tobacco.  It  also  covered  other  revisions  of  structures  and  categories  of  tobacco 
products other than cigarettes. The public consultation carried out in 2018 complemented 
the previous one, placing a greater focus on a possible revision of minimum rates and the 
taxation of cigarettes. It also covered the possible harmonisation of new products, in the 
light of the regulatory and market change occurred. 

The following consultation activities have been carried out: 

  Open  Public  Consultation  :  The  consultation  was  open  for  15  weeks  and  ran 

between the 23rd of May until the 3rd of September 2018  

  Targeted  consultations:  In  addition  to  the  public  consultation,  stakeholders  such  as 
relevant  authorities  from  each  Member  State  were  invited  to  complete  a  targeted 
questionnaire. 

  Interviews:  In-depth  interviews with  public authorities, industry  representatives and 
public  health  stakeholders  also  took  place,  to  collect  additional  information  on  the 
subject matter. 

The  table  below  provides  more  information  by  stakeholder  type  on  the  method  of 
consultation, the consultation period, content and language. 

Stakeholder type 

Method of 
consultation 

Consultation 
period 

Public Authorities  

Targeted 
questionnaires 
followed up by 
telephone and in-
depth interviews as 
appropriate 

July - 
September 
2018 

Language 
regime 
EN 

Content 

Views on the 
current 
challenges and 
opportunities 
that the rates and 
structures of 
harmonised 
tobacco taxation 
offers and the 
possible 
harmonised 
taxation of e-
cigarettes and 
novel tobacco 

60 

 
 
 
 
 
Industry/business/ 
associations 

NGOs 

Targeted 
questionnaires 
followed up by 
telephone and in-
depth interviews as 
appropriate 
Targeted 
questionnaires 
followed up by 
telephone and in-
depth interviews as 
appropriate 

Citizens/General 
Public 

Open public 
consultation 

May – 
September 
2018 

 products 

May-July 2018 

As above 

May-July 2018 

EN 

EN 

As above 

As above 

All EU 
languages 
except 
Irish 

In  addition  to  the  public  consultation,  all  other  stakeholder  consultation  activities  were 
organised within the supporting evaluation study. 

The consultation of e-cigarettes stakeholders has been conducted primarily in the form of 
a structured collection of data from direct concerned stakeholders (i.e. trade associations, 
economic operators, users associations), complemented by semi-structured interviews. 

Results 

  Open public consultation 

The public consultation was intended to gather the views of any interested party – from 
economic operators, to non-government organisations (NGOs), to individual citizens etc. 
on two main issues:  

(1)  The  current  taxation  of  conventional  tobacco  products  (cigarettes,  cigars  and 
cigarillos, and smoking tobacco) and specifically the level of rates and structures;  

(2)  The  status  of  novel  products,  i.e.  ‘electronic  cigarettes’  and  ‘heated  tobacco 

products’, which are not explicitly covered by the Directive. 

61 

 
 
 
 
 
 
 
 
The  consultation  was  carried  out  through  an  online  questionnaire  administered  through 
the EU Survey platform. The survey was launched on the 23rd of May and closed on the 
3rd of September 2018.70 

The questionnaire consisted of 26 questions, including both general questions and more 
technical ones. 

Overall,  the  public  consultation  received  11,388  valid  responses71,  of  which  the  vast 
majority  (96%)  from  citizens  responding  on  an  individual  capacity  and  some  4%  from 
representatives  of  industry,  NGOs,  public  administrations,  academic  institutions  and 
other corporate entities. The high rate of response among individual citizens is primarily 
due to the massive participation of e-cigarettes consumers.  

Some of the respondents have also chosen to upload a position paper to further explain 
their views. A total of 200 position papers have been received. 

The analysis of the results of the public consultation, as well as all contributions received, 
are available on the Commission’s website72. 

The  stakeholders’  opinions  on  the  issues  raised  in  the  public  consultation  generally 
diverge  in  accordance  with  the  specific  interests  of  the  respondent.  Public  health 
stakeholders  invariantly  support  stricter  tax  measures  on  tobacco,  while  the  tobacco 
industry  and  trade  stakeholders  advocate  for  minimal  or  no  revision  of  the  current 
situation.  If  any,  a  revision  of  the  fixed  amount  minima  seems  comparatively  more 
supported  than  a  revision  of  the  minimum  incidence  of  excise  duty  on  price.  Whether 
higher  tax  rates  would  lead  to  a  reduction  of  smoking  prevalence  or  to  an  increase  of 
illegal products are very divisive issues. Conversely, there is a moderate agreement that 
some substitution of cigarettes with other tobacco products, or novel products, as well as 
an increase of cross-border shopping are likely consequences.            

With respect to novel products, the widespread concern among e-cigarettes stakeholders 
and consumers about the possible adverse effects of e-cigarettes taxation should be noted, 
although  a  significant  share  of  operators  would  seemingly  support  a  harmonised 
definition with no minimum rate attached to it. More consensus can be found on the need 
to harmonise heated tobacco products – a need that is supported by the industry itself to 
overcome the current legal fragmentation. 

70 A longer period was foreseen to take into account the summer period  
71 The total replies received amounted to 11,410 but 22 records appeared as duplicate submissions from the 

same entity so were excluded from the analysis.  

72  Results  of  the  Public  Consultation  on  excise  duties  applied  to  manufactured  tobacco  and  the  possible 

taxation of novel products 

62 

 
 
 
 
                                                           
 
  Targeted  consultation  of  Member  States  authorities,  further  subdivided  into 

two separate questionnaires addressing respectively: 

o  Tax and customs authorities. Total respondents: 24 Member States. 
o  Public health authorities. Total respondents: 15 Member States.  

  In-depth  interviews  with  selected  stakeholders,  including  tax,  customs  and 
public health authorities, economic operators and trade organisations representing 
both  the  conventional  tobacco  products  and  novel  products  such  as  e-cigarettes 
and heated tobacco products. Total interviewees: 52 from 43 different entities. 

  Email consultation of e-cigarettes stakeholders, to complement and expand the 
above  interview  programme,  and  including  trade  organisations,  consumers 
associations, businesses and consumers. Total respondents: 52 from 10 countries. 

Perceived coherence and relevance    

The results of the consultation activities carried  out  through the  external  study indicate 
that  all  in  all  the  objectives  and  measures  laid  down  in  the  Directive  are  coherent  and 
aligned with other EU policies and international obligations. This judgment is confirmed 
by the majority of key stakeholders consulted. In particular, with few exceptions (notably 
cigarillos)  the  excise  definitions  of  products  are  consistent  with  customs  classification, 
while  no  major  competition  issue  was  ever  raised  against  the  Directive  (some  legal 
interpretations were occasionally required).  

The  Directive  has  taken  up  the  Framework  Convention  for  Tobacco  Control  (FCTC) 
guidelines’ recommendations on effective tax policies and the objectives of the EU and 
FCTC policies against illicit trades although according to public health stakeholders the 
Directive’s provisions seem not fully geared towards the achievement of major results in 
these areas. 

When compared to national priorities the objectives of the Directive are generally but not 
always  aligned.  By  far  the  most  important  aim  of  national  tax  policies  is  to  maintain 
stable  and  predictable  tax  revenue,  but  such  aim  is  not  explicitly  considered  or 
acknowledged in the EU excise legislation.  

Conversely,  there  is  a  close  alignment  between  MS  and  EU  priorities  as  concerns 
ensuring  and  effective  monitoring  and  control  of  tax  compliance.  To  ensure  fair 
competition  and  harmonised  classification  rules  are  both  national  and  Directive’s 
objectives,  while  reducing  the  tax  differential  between  Member  States  (hence  cross-
border  shopping)  is  a  major  EU  objective  that  rank  fairly  low  among  Member  States 
priorities.  

Tobacco control objectives are also not a main priority for tax authorities although they 
are evidently so for public health authorities. Regarding the relevance of the Directive for  

63 

 
 
 
  
 
 
 
 
 
tobacco control stakeholders acknowledge the contribution of measures like EU minima 
or the approximation in the taxation of cigarettes and fine-cut tobacco, whereas little can 
be  said,  according  to  public  health  experts,  on  the  ‘convergence’  of  tax  levels  between 
EU countries since it is an area poorly investigated.  

Another area frequently voiced as not sufficiently in line with the needs of the public health 
community is the lack of any explicit quantifiable public heath objective in the Directive, 
particularly in the light of the fact that these are now available within the structure of the 
Framework  Convention  on  Tobacco  Control  as  a  whole  and  could  therefore  serve  as 
reference benchmarks. 

Perceived impact of the Directive  

A  vast  majority  of  respondents  to  the  targeted  consultation  of  fiscal  authorities  have 
acknowledged the Directive had some impact on informing their tax policies and setting 
their  duty  levels.  Such  impacts  regard  primarily  raising  national  tax  levels  on 
manufactured  cigarettes  and  fine-cut  tobacco,  both  directly  (i.e.  to  comply  with 
requirements)  or  indirectly  to  keep-up  with  neighbouring  EU  countries  and  general 
trends.  For  the  other  tobacco  products,  a  more  indirect  role  of  the  Directive  in  shaping 
prices and influencing the market is reported, although in a few cases the impact was a 
major one (i.e. the phasing-out of special definitions of cigars and cigarillos for a couple 
of countries).  

Most of the added value generally recognised to the Directive is first of all of a technical 
nature.  The  Directive  represents  the  indispensable  legal  framework  for  the  coherent 
classification  of  tobacco  products  across  Europe  and  for  the  establishment  of  a 
harmonised  tax  collection  mechanism  compatible  with  the  single  market.  This  is 
acknowledged by the majority of tax authorities.  

In  line  with  the  results  of  the  analysis,  there  is  far  more  scepticism  that  the  Directive 
might  have  represented  a  viable  mechanism  to  promote  the  convergence  of  tax  levels 
across Member States or in specific macro-regions of the EU. This limited effect can be 
seen in both the markets for cigarettes and fine-cut tobacco, with significant convergence 
reported by just a couple of EU countries. On the other hand, it is acknowledged that the 
Directive have prompted the harmonisation of excise duty structure for cigarettes but this 
had limited concrete effects on the overall tax and price convergence between countries.   

As  a  result  of  this  limited  harmonisation,  a  somewhat  modest  direct  impact  of  the 
Directive  in  decreasing  cross-border  shopping  is  reported.  The  added  value  of  the 
Directive  is  therefore  mainly  perceived  as  a  stabilisation  mechanism  to  avoid  price 
competition between EU countries and prevent major market disruptions in trade flows. 
Interestingly, the majority of fiscal authorities still see some benefits in the fact that the 
Directive works to discourage ‘competitive taxation’ of tobacco products. However, this 

64 

 
 
 
 
 
 
 
mechanism  is  not  considered  having  relevant  effects  in  ensuring  fairer  competition 
between large and small players.  

This  widespread  perception  that  the  Directive  has  overall  succeeded  in  avoiding  fiscal 
competition between countries but could do relatively little to achieve a real convergence 
can  be  found  also  among  respondents  to  the  targeted  consultation  of  public  health 
authorities.  These  authorities  generally  recognised  that  the  reduction  in  smoking 
prevalence  would  have  probably  been  lower  without  the  contribution  of  the  Directive, 
particularly as far  as impact  on the  young is  concerned. Only one respondent  dissented 
with this opinion assuming that the Directive de facto pre-empted the adoption of much 
bolder policy stances from public health perspective.   

On the other hand,  according to  public health stakeholders the smoking  prevalence has 
not decreased as it should have been in the period considered, and most of them attribute 
this  failure,  at  least  in  part,  to  insufficient  taxation.  In  this  sense,  various  interviewees 
saw some link between the ‘conservative’ minimum rates envisaged in the Directive and 
the fact  that  taxation has not  increased enough in a number of EU  countries (including 
those that were already compliant with EU minima).  

Perceived Efficiency of the Directive  

By  its  own  nature  the  Directive  does  not  pose  major  problems  with  implementation  or 
cause major administrative burdens on public authorities. Coherently, there is a general 
consensus among the respondents to the targeted consultation of the fiscal authorities that 
the  administrative  burden  imposed  on  them  by  the  tobacco  excise  legislation  can  be 
considered  as acceptable and fully justified by the benefits  it produces. Since no major 
changes  were  introduced  in  2011,  practically  all  respondents  agree  in  considering  that 
this administrative burden has remained fairly stable over time.  

The appearance of ‘bulk’ tobacco as an illegal way of circumventing excises for fine-cut 
tobacco has highlighted the definition of ‘smoking tobacco’ as potentially inefficient and 
deserving  possible  refinements.  This  was  compounded  with  the  impact  of  stricter 
definitions  reportedly  adopted  in  some  EU  states  following  the  EU  Court  of  Justice’s 
ruling C-638/15 in 2017. Issues with the classification of tobacco refuses are mentioned 
by  only  a  minority  of  relatively  large  Member  States  where  large  tobacco  factories  are 
located, but hardly an issue for the others.  

Past  experience  of  problems  with  the  definition  of  cigars  and  cigarillos  and  its 
misalignment  with  the  customs  CN  definition  is still  reported  as  a  major  problem  by  a 
handful of Member States but already perceived as much less severe or as no problem at 
all  by  all  the  others.  The  case  of  heated  tobacco  seems  quite  different,  and  there  is 
overwhelming  consensus  that  a  harmonised  approach  to  the  taxation  of  heated  tobacco 
should  indeed  be  established  at  the  EU-level  to  avoid  legal  fragmentation  and  the 
underlying  administrative  costs  of  reconciling  shipments  made  under  different  tax  

65 

 
 
 
 
 
 
 
systems,  even if this came at  the cost  of overhauling the existing  IT systems of all EU 
countries by introducing a new category.  

Finally, a majority of respondents seems inclined not to consider water pipe tobacco as 
an  issue  serious  enough  to  justify  the  establishment  of  a  separate  tax  category  and 
therefore  they  do  not  also  appear  ready  to  bear  the  related  adaptation  costs.  Only  two 
Member States consider it worth the effort the establishment of a dedicated tax category 
for water pipe tobacco, with all the ensuing operational costs.  

Business-respondents  to  the  open  public  consultation  were  given  the  possibility  to 
indicate more specific regulatory burdens imposed on their economic activities by the EU 
excise  legislation.  In  practice,  none  of  respondents  indicate  any  burden  of  such  kind, 
largely  confirming  the  limited  effects  of  the  Directive  in  this  respect.  The  few  answers 
received,  have  come  from  e-cigarette  operators  lamenting  the  effects  of  national  tax 
regimes in their country of origin, but this remains outside of the scope of the Directive.   

66 

 
 
 
ANNEX 3: METHODS AND ANALYTICAL MODELS 

Approach and method 

An external study has been contracted in order to support the evaluation of the tobacco tax 
Directive. The research was designed and conducted in a participative and collaborative way 
with the European Commission and all relevant stakeholders, whose input was important to 
inform the analysis.  

The study – Study on Council Directive 2011/64/EU on the structure and rates of excise duty 
applied  to  manufactured  tobacco,  Economisti  Associati,  2019”  –  was  organised  under  the 
Framework Contract TAXUD/201/CC. It was commissioned to support the evaluation of the 
Directive framework. The study was organised as an evaluation, following the requirements 
of the Better Regulation Guidelines, and the evaluation questions were presented in the main 
document of the evaluation. 

The  study  provided  as  well  the  reconstructed  intervention  logic  for  the  Directive.  The 
intervention logic was reconstructed from the recitals of the Directive and the analysis of any 
accompanying  documentation  at  the  time  of  the  preparation  and  negotiations  of  the 
Directive.  The  Inter-service  Steering  Group,  which  accompanied  the  study,  discussed  and 
validated the intervention logic. 

Scoping 

The study covered in principle all 28 EU Member States, at least for the general appreciation 
of the Directive’s functioning. They thus consisted of both a general EU-wide analysis of the 
implementation  of  the  Directive  for  all  Member  States.  The  time  period  the  evaluation 
covers years 2010 – 2017. 

Data collection 

The  study  was  structured  as  an  evaluation  and  followed  a  mixed-methods  approach, 
featuring a range of tailored and targeted techniques and tools. They have been designed and 
deployed in a way that was deemed to bring the most value to the analysis. The analysis was 
based  on  numerous  consultations  with  stakeholders  (as  presented  in  Annex  2),  as  well  as 
desk research accompanied by in depth  analysis of economic and statistical data using and 
cross checking different existing databases and an econometric analysis. 

Desk research 

An extensive mapping and review of documentary sources was conducted. The first line of 
research  focussed  on  Directive  2011/64/EU  and  the  broad  policy  environment:  the  public 
health  policy  framework,  the  policy  framework  concerning  the  fight  against  illicit  trade  of 
tobacco  and  fraud,  the  excise  duty  system  legal  and  operational  framework;  the 
jurisprudence of the CJEU; the related customs framework the competition cases. 

A second line of desk work involved collecting and mapping the existing scientific literature 
on four main themes, as follows:  

67 

 
 
o  Thematic EU-funded studies concerning specific issues at stake and research projects 
on  tobacco  control  policies.  Other  relevant  studies  and  reports  published  by 
international organisations, i.e. WHO, the World Bank, OECD etc.  

o  Existing  publications  on  modelling  and  analysing  cigarettes  and  tobacco  market 
dynamics,  i.e.  correlation  of  tax  levels,  prices  and  consumption,  substitution  across 
products, substitution with illicit products etc., including those promoted by national 
tax authorities. 

o  Existing publications on trends and factors underlying demand for tobacco products 
and smoking prevalence, including the relative impact of taxation and other tobacco 
control measures on demand, and socio-demographic factors, as well as literature on 
the quantification of ultimate public health impact of tobacco consumption. 

o  Specific information on new products regulatory and market trends in EU countries, 

as well as information on product developments, including outside the EU.    

Databases  

The  study  findings  largely  rely  on  extensive  panel  data  concerning  the  key  variables  of  the 
logic model described above. To this end, an inventory of available data was carried out during 
the inception phase. This was followed by a substantial effort of systematisation of datasets, to 
address  the  numerous  consistency  and  completeness  issues  that  emerged.  This  effort  was 
necessary both for providing a thorough answer to the descriptive questions on the overtime 
trends  in  the  market  and  taxation  of  tobacco,  and  for  feeding  these  data  in  the  quantitative 
analysis models. In fact, as discussed further below, some of the datasets identified turned out 
too incomplete or inconsistent to support an econometric assessment and different approaches 
had to be devised. 

The main datasets collected and processed were:  

  The Excise Duty Table (EDT) series compiled by DG TAXUD and the related Tax in 

Europe Database (TEDB):  

i. 

ii. 

Tax rates and structures applicable in the Member States to the various categories 
of tobacco products and related main indicators, i.e.: the weighted average price 
(WAP),  the  excise  duty  yield  at  WAP  level  (EDY)  and  the  total  tax  burden 
(excise duty plus VAT).  
Tax  receipts,  broken  down  by  cigarettes,  cigars,  cigarillos  and  other  smoking 
tobacco.  

iii.  Releases for consumption (RfC) data for cigarettes and fine-cut tobacco. In some 
cases, it was necessary to disaggregate FCT from other smoking tobacco, which 

68 

 
 
 
 
some Member States report jointly, and to fill data gap through estimates based 
on adjusted Euromonitor International data.73  

  Euromonitor International data series since 2005 for all Member States  

iv.  Overall  market  volume  and  value  (in  national  currency  and  EUR)  –  primarily 
used  for  filling  gaps  in  the  RfC  series  and  as  the  base  for  calculation  of  other 
analytical indicators based on the sample of brands covered by Euromonitor.    
v.  Retail  price  of  cigarettes  and  FCT.  Euromonitor  International  collects  this 
information  from  store  checks  often  providing  separate  figures  for:  (i)  different 
stock-keeping  unit  (i.e.  the  different  types  of  the  same  brand);  (ii)  different 
packaging  (box  or  paper,  number  of  units  contained);  (iii)  different  outlets 
(tobacconist, supermarkets, bar and restaurants, petrol stations etc.). In seven EU 
countries  the  price  of  stock-keeping  units  can  change  at  the  retail  level,  so  the 
consultant  had  to  calculate  a  single  average  price  per  brand.  Some  data  gaps 
regarding recent years were filled through direct price search on retail outlets of 
the Member States. For the analysis of price trend in one country, the consultant 
used  prices  expressed  in  national  currency,  to  avoid  the  distortion  induced  by 
fluctuation in the exchange rate.  

vi.  Market share by brands of cigarettes and FCT. The raw datasets contained some 
gaps  and  other  scarcely  plausible  figures  that  had  to  be  corrected  through 
modelling.  However,  in  order  to  avoid  distorting  the  results  of  the  analysis  a 
‘light  touch’  was  adopted.  The  consultant  primarily  used  these  figures  for  the 
segmentation  of  the  cigarettes  market  between  low,  mid,  and  premium  price 
categories  and  for  simulating  the  impact  of  change  of  structures  on  the  market 
equilibrium.   

the 

(HTP). 

In  particular, 

figures  drawn 

tobacco  products 

  EcigIntelligence database and its market and regulatory ‘trackers’ on e-cigarettes and 
heated 
from 
EcigIntelligence  regard:  (i)  market  value  and  trends  in  Member  States  (some  18 
countries  covered),  (ii)  price  level  trends  for  the  various  type  of  product,  (ii)  the 
estimated prevalence of consumers of e-cigarettes in the population, and (iv) the tax 
regime  applied  (where  relevant).  The  EcigIntelligence  data  are  collected  through  a 
number of sources and are the most detailed and consistent market source available, 
but they are not officially validated data. At present, there are no official statistics on 
these products available at the EU level. As regards the consumption prevalence, the 
consultant  developed  model  estimates  combining  EcigIntelligence  data  with  the 
results  of  the  Eurobarometer  surveys  ,  and  Euromonitor  International  estimates  on 

73 For instance, since 2017 figures are not provided in the EDT, the consultant has applied to EDT 2016 figures 
the  growth rate  registered by  Euromonitor in 2017. The Euromonitor figures could not be taken  ‘at  face 
value’  since  they  are  estimated  differently,  however  in  terms  of  trend  they  seem  largely  consistent  with 
EDT data.   

69 

 
 
 
 
                                                           
the  share  of  users  among  the  population.  Regarding  heated  tobacco  products,  the 
information  available  at  the  time  of  the  study  consisted  of  essentially  one  product 
market  data  that  have  been  retrieved  primarily  from  the  manufacturer’s  (PMI) 
periodical report to investors.  

  For  smoking  prevalence,  the  consultant  has  matched  different  sources  and  in 
particular: WHO, Eurostat-EHIS, Eurobarometer, and national estimates indicated by 
the  public  health  authorities  who  took  part  in  the  consultation.  The  affordability 
indicators were developed combining different sources.   

  There are limited data sources on illicit trade of tobacco flows and magnitude. At the 
time  of  research,  the  most  comprehensive  panel  data  source  available  was  the 
KPMG’s  Project  SUN  (hereinafter  ‘SUN’)  report  series,  which  contain  detailed 
estimates  of  the  overall  amount  of  non-domestic  consumption  of  cigarettes  for  all 
Member  States,  further  broken  down  by  legal  and  illegal  consumption  (contraband 
and  counterfeit,  including  ‘illicit  whites’)  and  the  origin  of  flows.74  The  SUN 
estimates are based on the ‘empty pack survey’ data collected at Member States level 
by different independent market research agencies and elaborated by KPMG through 
its ‘flow model’.75 Although formally an independent exercise, commissioned in the 
latest edition by the Royal United Services Institute for Defence and Security Studies 
(RUSI), the Project SUN is sponsored by the industry.76 For this reason the validity 
of its results have been questioned77 and need to be taken with due caution.  

The  consultant  managed  to  develop  its  own  estimates  for  analytical  purposes  -  and 
considering  the  above  caveats  –  using  the  raw  data  underlying  Project  SUN.  The  raw 
data  were  re-elaborated  by  the  consultant  in  line  with  the  study  needs  and  duly 
highlighting  the  (in)consistency  with  own  survey-based  estimates  (elaborated  from 
Eurobarometer) and seizures data collected from OLAF and directly from Member States 
(through  the  tax  authorities’  consultation).  As  clearly  specified  by  data  providers, 
seizures data present serious limitations of comprehensiveness (estimated underreporting 
especially for minor-size seizures) and comparability (the databases are not checked and 
cleaned), so they should be taken with great caution. 

  All  other  macro-economic  and  socio-demographic  data  required  were  sourced  from 
Eurostat  databases.  In  addition  to  the  already-mentioned  statistics  on  production  and 

74 See: https://home.kpmg.com/uk/en/home/insights/2018/07/project-sun-2017.html. In early years, the project 
was  named Project STAR. Overtime  there has been refinements in  the data collection and the analytical 
methodology applied, but no major break of time series is apparent.    

75 For a detailed description of the methodology used in Project SUN see KPMG, 2017 Results, Methodology 

and Appendices 

76  Initially  (Project  STAR)  the  exercise  was  sponsored  by  PMI  then,  until  2015,  by  the  four  Big  Tobacco 

companies. In 2016, JTI did not support the exercise.     

77 See: Joossens et al., From Cigarette Smuggling to Illicit  Tobacco Trade, 2012; Gilmore et al., ‘Towards a 
Greater Understanding of the Illicit Tobacco Trade in Europe: A Review of the PMI Funded ‘Project Star’ 
Report’, 2013. 

70 

 
                    
 
 
 
                                                           
trade, the consultant has collected from Eurostat data on GDP and income trends (inter 
alia to calculate the ‘affordability’ variable), price level and inflation trends (harmonised 
indexes of consumers prices – HICP), purchasing power parities (PPP) of EU countries, 
input/output tables, household budget expenditure, population trends etc. Exchange rates 
have been drawn from the European Central Bank annual averages.78   

Econometric analysis 

The backbone of the study consists of a broad-scope quantitative analysis carried out through 
econometric methods,  which aimed at  investigating the dynamics of the tobacco market  in 
the EU countries in relation to the tax policies established at the EU level.  

78 The EDT normally use the exchange rate registered in October of the previous year, which may be slightly 
dissimilar from the average annual exchange rate used in the external study (for countries whose exchange 
rate with the Euro is not fixed).  

71 

 
 
 
 
 
                                                           
ANNEX 4: TAX STRUCTURES AND MINIMUM RATES 

Cigarettes 

The tobacco tax Directive (Articles 7 to 12) requires Member States to levy a minimum rate 
of excise duties on cigarettes. 

This minimum rate must consist of: 

  A specific component of between 7.5% and 76.5% of the total tax burden (TTB) - 

expressed as a fixed amount per 1000 cigarettes 

  An ad valorem component - expressed as a percentage of the maximum retail 

selling price 

In addition, the overall excise rate must be: 

  At least EUR 90 per 1000 cigarettes 

  At least 60% of the weighted average retail selling price 

Member States that apply excise duty of EUR 115 or more, however, do not need to comply 
with the 60% criterion above. 

EU legislation only sets harmonised minimum rates. Member States are free to apply excise 
duty rates above these minima, according to their own national needs. 

Specific provisions exist to allow Portugal to apply a reduced rate up to 50% less than the 
required overall minimum excise duty on cigarettes consumed in the most remote regions of 
the Azores and Madeira. 

Other tobacco products 

The Directive also sets down minimum excise duty rates for manufactured tobacco other 
than cigarettes (Articles 13-14). 

The structure for taxing "other tobacco products" is slightly different than for cigarettes. 

Member States can choose between applying a specific component or an ad valorem 
component, or if they wish, they may apply a mixture of the two. 

Minimum rates are set out for three distinct categories of "other tobacco products" 

Product Category  

Minimum Rate  

Fine-cut smoking tobacco 

48% of the weighted average retail selling price* 
Or 
EUR 60 per kilogram* 

72 

 
 
Cigars and Cigarillos 

Other smoking tobaccos 

5% of the retail selling price 
Or 
EUR 12 per 1000 or per kilogram 

20% of the retail selling price 
Or 
EUR 22 per kilogram 

* To gradually increase, by 2020, to 50% or EUR 60 

Minimum Excise Duty 

The  Minimum  Excise  Duty  (MED)  represents  the  minimum  amount  of  excise  duty  (per 
quantity  of  product)  that  a  Member  State  can  decide  to  levy  on  certain  tobacco  products 
when the sum of specific and ad-valorem duties falls below an established threshold that is 
defined nationally. The MED consists in a tax ‘floor’ and was designed to prevent the risk of 
too low taxation (hence too low prices) and 'race to bottom' in the cheaper segments of the 
market. 

73 

 
 
 
 
ANNEX 5: MAIN CJEU RULINGS ON THE INTERPRETATION AND 
IMPLEMENTATION OF THE DIRECTIVE79 

Subject 

CJEU Rulings 

C-197/08 Commission v France 

Dismissal of minimum retail price 
provisions for in certain Member 
States 

C-198/08 Commission v Austria 

C-221/08 Commission v Ireland 

C-571/08 Commission v. Italy 

C‑428/13 Yesmoke Tobacco  

C-216/11 Commission v France 

Dismissal of MED higher than the 
excise applicable above MPPC level  

Dismissal of quantitative 
restrictions on products moved 
cross-border for own consumption  

Admissibility of national legislation 
prohibiting price rebate at retail 
level 

C-221/15  Etablissements Fr. Colruyt  

Interpretation of the excise 
definition of ‘smoking tobacco’  

C-638/15 Eko-Tabak  

Action against strict anti-
forestalling measure  

C-126/15 Commission v. Portugal 

Interpretation of the excise 
definition of cigarillos  

C-638/17 Skonis ir kvapas 

79   Source:  Study  on  Council  Directive  2011/64/EU  on  the  structure  and  rates  of  excise  duty  applied  to 

manufactured tobacco, Economisti Associati, 2019 

74 

 
 
 
 
 
 
 
 
 
                                                           
ANNEX 6: MAIN FINDINGS FROM PREVIOUS EVALUATIONS OF DIRECTIVE 2011/64/EU 

Directive  2011/64/EU  has  already  undergone  an  evaluation  process,  which  started  in  2012 
under the Regulatory Fitness and Performance Programme (REFIT). Within this context, an 
independent  evaluation  study  was  completed  in  2014  by  a  consortium  led  by  Ramboll 
Management Consulting (hereinafter ‘Ramboll 2014’). On this basis, at the end of 2015 the 
Commission  submitted  a  Report  to  the  Council  in  201580  and  received  in  March  2016  the 
mandate  to  explore  possible  regulatory  revisions.81  Within  this  framework,  an  impact 
assessment  study  was  conducted  by  Economisti  Associati  in  2016-2017,  which  was 
published  in  January  2018  (hereinafter  ‘EA  2018’)82  along  with  the  Commission  Report 
COM(2018) 17 final.  In that report, the Commission  explained the reasons  why on certain 
issues a revision of the Directive was not required or premature at that moment in time. 83 

The  Ramboll  2014  focused  primarily  on  efficiency  and  effectiveness  aspects  of  the  excise 
duty structures laid down in the Directive, and identified a series of possible issues that were 
further examined under the EA 2018, with a view to establish whether an amendment of the 
Directive  was  required.  The  minimum  rates  were  not  at  stake  in  both  exercises  since  they 
were too recently introduced. 

In its Report 2018 the Commission noted among other things:  

  There is a general lack of data on e-cigarettes and heated tobacco products to underpin a 
proposal for harmonised taxation. However, the Commission expressed the intention to 
re-consider  the  matter  in  the  context  of  the  current  new  evaluation  process,  taking 
advantage of new information possibly stemming from the Tobacco Products Directive 
reporting obligations under Article 20.84  

  Some issues identified in the Ramboll 2014 have since been solved at national level or 

have been settled, so an intervention is no longer need. 

  The  new  evaluation  of  the  Directive  (in  accordance  with  Article  19)  shall  include 

(primarily) a review of the minimum rates level established in the Directive itself. 

80  COM(2015)  621,  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, 2015. 

81 “Council conclusions on the structure and rates of excise duty applied to manufactured tobacco”, 08.03.2016 

83 COM(2018) 17 final, Report from the Commission to the Council on Directive 2011/64/EU on the structure 

and rates of excise duty applied to manufactured tobacco. 

84  Directive  2014/40/EU  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 

75