COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE 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

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  EN 

   EUROPEAN COMMISSION  Brussels, 10.2.2020  SWD(2020) 33 final  COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE 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) 32 final}  
 
 
EXECUTIVE SUMMARY 

Council Directive 2011/64/EU1  (hereafter the Directive) lays down the EU rules for 
the taxation of manufactured tobacco products by setting the structure and minimum 
rates.  It  aims  at  ensuring  the  proper  functioning  of  the  internal  market  and,  at  the 
same time, a high level of health protection and fight against tax fraud, tax evasion 
and illegal cross border shopping.  

The  current  evaluation  assesses  the  performance  of  Directive  2011/64/EU  against 
the evaluation criteria set out in the Better Regulation Guidelines2. 

In  general,  the  Directive  has  been  working  well  in  terms  of  predictability  and 
stability of fiscal revenues for Member States. It has also provided a high degree of 
flexibility  for  Member  States  to  implement  their  national  fiscal  policies  regarding 
traditional tobacco products. The excise tax revenue in the EU in 2017 from tobacco 
was EUR 82.3 billion. However, the developments and emergence of new products 
(e-cigarettes,  heated  tobacco  products  and  new  addictive  products  containing 
nicotine or cannabis) reveals  the limits  of this legal  framework. The current  scope 
and provisions of the Directive are not able to cope with these market developments. 

This  evaluation  shows  that  the  impact  of  the  Directive  on  public  health  has  been 
moderate.  The  Directive  gave  an  initial  impetus  with  the  increase  of  EU  minima 
rates for cigarettes and fine-cut  tobacco, but  only  a few Member States,  with  very 
low  levels  of  taxation,  were  actually  affected.  In  any  case,  the  Directive  is  not 
giving this stimulus any longer. Tobacco taxation is regarded as the most effective 
instrument  to  reduce  tobacco  consumption  and  tobacco  prevalence.  The  high 
number of smokers in the EU is still a matter of significant concern with 26% of the 
overall EU adult population and 29% of young Europeans aged 15-24 smoking. In 
the USA and Australia, less than 15% of adults currently smoke3.  

The Directive leaves enough freedom and flexibility to Member States to pursue a 
more ambitious public health agenda at national level supported by higher domestic 
taxation rates. However, the significant  difference of taxes (hence prices) between 
Member  States  may  limit  these  ambitions  where  high  levels  of  cross  border 
shopping take place, if price gaps are representing a sufficient economic incentive to 
go and buy across borders. Average prices for a pack of cigarettes in Member States 
range  from  EUR  2.57  to  EUR  11.37.  This  makes  it  easier  for  people  –  including 
young  adults,  to  access  cheaper  tobacco  products  and  ultimately  weakens  health 
policy measures taken in the country of  consumption. Overall, the achievement of 
the  ‘convergence’  objective  of  the  Directive  by  means  of  EU  minima  provision 
appears inherently problematic. This lack of convergence of taxes across the EU is a 
major source of concern for some Member States, both for lost fiscal revenues and 
for undermining public health measures. The EU aggregated net effects of economic 

1 Council Directive 2011/ 64/EU of 21 June 2011 on the structure and rates of excise duty applied to 
manufactured tobacco. The Directive entered into force as of 1 January 2011.  
2 Better Regulation Guidelines 
3 Centers for Disease Control and Prevention and  Australian bureau of statistics 

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driven  cross  border  flows  are  estimated  at  approximately  EUR  2.3  billion  in  lost 
revenue4.  

The level  of illicit trade  for cigarettes  and fine-cut  tobacco  remains  a challenge in 
terms  of  enforcement,  loss  of  revenues  and  impact  on  smoking  prevalence.  The 
evaluation indicates that the levels have actually decreased slightly over the years, 
but  remain  substantial  (around  8  %  of  actual  consumption,  representing  EUR  7.5 
billion of potential lost excise revenues) and this calls for strengthening enforcement 
policies  and  designing  tax  regimes  with  enforcement  safeguard  measures.  The 
evaluation also confirms the increase of illicit manufacturing of cigarettes within the 
EU calling for a harmonised approach to monitor flows of raw tobacco within and 
into the EU. 

To conclude, 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. 

4 When 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  

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