CELEX: 51987PC0326
Language: en
Date: 1987-08-21
Title: PROPOSAL FOR A COUNCIL DIRECTIVE ON THE APPROXIMATION OF TAXES ON MANUFACTURED TOBACCO OTHER THAN CIGARETTES (presented by the Commission)

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COM (87) 326
Vol. 1987/0190
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 ---pagebreak--- COMMISSION OF THE EUROPEAN COMMUNITIES
                                                   COM(87 ) 326 final / 2
 REVISED VERSION
                                                  Brussels , 21 August 1987
                                PROPOSAL FOR A COUNCIL DIRECTIVE
                     ON THE APPROXIMATION OF TAXES ON MANUFACTURED TOBACCO
                                        OTHER THAN CIGARETTES
                                    (presented by the Commission)
                                      i
    C0M(87 ) 326 final / 2                             -âi/cb
 ---pagebreak---                                         Λ
             Proposal for a Council Directive on the approximation
            of taxes on manufactured tobacco other than cigarettes
                             EXPLANATORY MEMORANDUM
I.     INTRODUCTION
The overall approach towards completing the internal market as far as
indirect taxation is concerned is described in the      Global Communication
to the Council'1 . That communication sets out the reasons underlying
the proposals which the Commission is making and deploys the arguments
in their support . It is particularly important therefore that the present
document should be read in conjunction with the Global Communication .
This proposal for a Directive concerns excise duties on manufactured
tobacco other than cigarettes ; it lays down the common structure and
rates that are to apply from 31 December 1992 at the latest .
( 1 ) C0M(87)320 final
 ---pagebreak---                                          - 2 -
II .    BACKGROUND
                                                             (1)
1.      Council Directive 72 / 464 / EEC of 19 December 1972     , as supplemented
in particular by Directive 77/805/ EEC of 19 December 1977 ^, sets out in
Title I general provisions applying to all types of manufactured tobacco
and in Titles II and Ila special provisions applying only to cigarettes
during the first and second stages respectively of the harmonization of
the structure of excise duties .
2.      The general provisions applying to all types of manufactured . tobacco
( i.e. cigarettes , cigars and cigarillos , smoking tobacco , snuff and chewing
tobacco ) include the following :
        - Member States are to refrain from imposing charges other than excise
           duty and VAT on these products ;
        - The Council , acting on a proposal from the Commission , is to adopt
           the provisions necessary to determine the way in which manufactured
           tobacco should be defined and classified ^;
        - manufacturers and importers are to be free to determine the maximum
           retail selling prices for each of their products ;
        - the rules for collecting the excise duty are to be harmonized during
           the final stage at the latest ; all importers and national manufacture 's
         ; of manufactured tobacco are to be subject to the same arrangements for
           collecting the duty ( e.g. tax stamps or some other arrangement ! and to
           the same rules for payment ( e.g. deferred payments ).
( 1 ) 0J NoL' 303 of 31 December 1972,
<2) 0J No L 338 of 28 December 1977,
^ These provisions were laid down in Council Directive 79/ 32 / EEC c *
      18 December 1978 .
                                                                  ./.
 ---pagebreak---                                          - 3 -
3.        The Council has so far not adopted any specific provisions relating
to harmonization of the structure of excise duties on manufactured tobacco
other than cigarettes .      However , in response to the Council Resolution of
21 April 1970^*, the Commission also put forward proposals on cigars .
                                    (2)
cigarillos and smoking tobacco          designed to subject them to a purely ad
valorem excise duty not exceeding , during the first stage , a rate equivalent
to 40% of the retail selling price in the case of cigars and cigarillos and
50% in the case of smoking tobacco . It was not stipulated whether the duty
on cigars could be different from that on cigarillos , whether the duty on
cigars made of natural tobacco could differ from that on other cigars or
whether all smoking tobaccos should be chargeable to duty at the same rate .
Provision was also made to exempt snuff and chewing tobacco from duty .
4.        However the discrepancies between the tax systems and rates of the
Member States effectively prevented any agreement being reached on these
proposals . Instead the Council 's efforts have concentrated on harmonizing
the tax structure of cigarettes , which account for over 90% of the
manufactured tobacco market .
5.        Today within the Community there is still no common basis for
assessing excise duties . These are variously expressed as a proportion
of the selling price inclusive of all taxes , as a specific duty or as a
combination of the two . Annexes 1 , 2 and 3 contain tables giving for each
Member State the ^structure and rates of the taxes applicable to manufactured
tobacco,      other than cigarettes .
 ( 1 ) 0J No C 50 of 28 April 1970
 /p\
       proposal for a Directive in 0J No C 4 of 18 January 1971 , p. 22 ,
       subsequently adopted as Directive 72 / 464 / EEC of 19 December 1972
       ( OJ No L 303 of 31 December 1972 ).
                                                                ./.
 ---pagebreak---                                                 4
6.         The purpose o ( lit is proposal , llierclore , is not only to establish
a common structure and basis of assessment for the excise duty on
manufactured tobacco other than cigarettes but , at the same time , to
determine the rates that will make it possible to do away with tax
 frontiers by harmonizing the tax burdens arising from the combination
of the two taxes ( excise duty and VAT ) levied on such products .
 III .    SPECIFIC REMARKS
 Ai l li.lw 1 ; Dwioi in I n lug I lit? u lnn.imi? .mil b.f.l -. uf assessment
of the excise duty
1.         Directive 72 / 464 / EEC does not mention the actual structure of the
excise duties to be applied to cigars and cigarillos , smoking tobacco ,
chewing tobacco and snuff . The structure , which may be either ad valorem ,
specific or mixed , needs therefore to be determined . The reasons why a
mixed or specific tax does not seem suitable for the Community tax system
and why an ad-.valorem tax seems more appropriate are set out below .
2.     Mixed duty
In the case of cigarettes , a mixed duty made up of a specific and an
ad valorem component was adopted in 1972 ( Directive 72 / 464 / EEC ) after a
compromise between the different tax systems of the original six Member
States had been worked out .
The "mixed" system of taxation on cigarettes is feasible because of the
intrinsic characteristics of cigarettes , viz . a unit weight of around 1 g
irrespective of their diameter or length and the fact that a large prooorticr.
of the cigarettes smoked in each country comes within the "most popular "
price category, which provides the benchmark for the level of taxation .
A "mixed" system does not , however , seem appropriate for the other tyces
of manufactured tobacco .
                                                                      ./.
 ---pagebreak---                                        5
Indeed, the supply of cigars and cigarillos is characterized by very
wide choice coupled with extremely varied prices . While the spread of
prices for cigarettes is relatively narrow ( there is no country where
the price of the most expensive cigarette brand is more than twice the
price of "popular" brands ) the price range for cigars and cigarillos
is extremely wide , with the highest prices exceeding the lowest by a
factor of ten or more . There are also major quality distinctions and a
multiplicity of different retail products of varying weights . Nowhere is
a particular price category clearly predominant .
It is therefore impossible to introduce a harmonized mixed system under
such circumstances without seriously distorting existing market structures .
Denmark , in fact , is the only country to apply a mixed system to cigars
and cigarillos.'
As regards smoking tobacco , the only reason which might militate in favour
of a " mixed " system of taxation would be the relationship that some
countries feel they must establish between the taxation of cigarettes
and that of "handrolling " tobacco . Inevitably , however , such a relationship ,
if one has to be established , can be only in relation to the tax on
"popular" cigarettes . In this case , a mixed tax structure is not needed
for smoking tobacco ; it is sufficient to fix either a specific amount of
tax or a proportional rate of tax that takes account of the desired
relationship with the tax burden on " popular " cigarettes .
Moreover , no Community definition exists ( see Directive 79 / 32 / EEC ) that
makes it possible to distinguish between " rol l -your-own" smoking tobacco
and pipe tobacco .
Only two countries , Germany and the Netherlands , apply a "mixed " tax
structure but this creates problems when it comes to deciding on the
respective levels of the two components .
                                                                  ./.
 ---pagebreak---                                         - 6 -
For all these reasons , the Commission considers that a mixed system of
taxation would be inappropriate for these products . The same is true of
snuff and chewing tobacco , to which Member States , for practical reasons
and because of the relative insignificance of these products , apply the
same system of taxation as to smoking tobacco .
3.   Spécifie duty
In the case of cigars and cigarillos , a specific excise duty per unit
would make the incidence of the tax highly degressive since it would nor
take account of the price component .   The cheaper products would thus be
driven from the market , increasing the burden of the duty per unit ;   the
process would then start all over again as part of a snowball effect .    No
country has , in fact , opted for a system of specific duty per unit .
A specific system based on the weight of raw tobacco used in manufactur inc
or on the weight of the final product would equally fail to take intc
account such factors as the wide range of prices and quality differentials
( even within a particular weight class ), and the same drawbacks as those
enumerated above would arise . The United Kingdom and Ireland are the
only Member States to apply such a system of taxation . In those countries ,
the incidence of taxation as a proportion of the retail selling prices of
cigars and cigarillos varies quite considerably . Moreover , a specific duty
does not take account of the effect of customs duties and would result in
some loss of protection that Member States applying a proportional excise
duty currently enjoy against products from third countries .
As regards smoking tobacco , a purely specific excise duty ( taxation by
weight ) has advocates only in the United Kingdom , Ireland and Denmark .
These countries also distinguish between pipe tobacco and other smoking
tobacco- although as yet no Community definition exists in this fielc .
This distinction is based on differing national definitions , and it '3
certainly no accident that the only countries applying a specific duty on
its own or as part of a mixed system have had to make this distinction .
                                                               ./.
 ---pagebreak---                                           7
 If a specific (or mixed) system were chosen , there would be no avoiding
the n&ed first to establish additional definitions within the group of
smoking tobaccos . This would be made all the more difficult by the fact
that there are smoking tobaccos sold on the market today which can be
used both as pipe tobacco and for rolling cigarettes .
Again, the Commission considers that a wholly specific system of taxation
would be inappropriate for cigars , cigarillos and smoking tobacco . The
same is true of snuff and chewing tobacco since these are subject in Member
States to the same system as smoking tobacco .
4.    Proportional duty
A purely ad valorem system based on retail selling prices freely determined
by manufacturers or importers pursuant to Article 5 of Council Directive
72 / 464 / EEC is the system of taxation that would interfere least with the
ranges in prices and weights , quality differences and product variety .
Moreover , an ad valorem system is already applied in nine Member States
with regard to cigars and cigarillos and in seven Member States with regard
to smoking tobacco , snuff and chewing tobacco . In the Commission 's view
this system would be the best choice for a Community system .
An ad valorem structure also has the advantage of being simple as well as
not requiring rates to be varied or additional definitions to be introduced
within each category . While , in the case of cigars and cigarillos , sone
Member States apply proportional rates of taxation that differ according'
to product weight or composition ( see below , concerning Article 3 ), in
the case of smoking tobacco no country that applies a proportional duty
has deemed it necessary to apply more than one rate .
                                                                ./.
 ---pagebreak---                                            - 8 -
 5.   Common structure and basis of assessment
 Article 1 of the proposal for a Directive specifies the types of
 manufactured tobacco ( other than cigarettes ) to which the Directive
 applies and lays down the principle of introducing an ad valorem excise
 duty .
 The basis of assessment for the excise duty is the maximum retail selling
 price , inclusive of all taxes , of each product . That price is freely
 determined by the manufacturer or the importer for each of his products ,
 in accordance with Article 5 of Directive 72 / 464 / EEC .
  Article 2 : Product definitions
 This Article stipulates that the Directive applies to the products as
 defined in   Council Directive 79 / 32 / EEC of 18 December 1978 . It should
 be pointed out that cigars and cigarillos fall within the same definition .
 As a result , there are no Community criteria for distinguishing between
 cigars and cigarillos on the basis of size or weight or between the
 different varieties of cigar and cigarillo on the basis of quality or
 grade of tobacco . Nor are there any Community criteria for distinguishing
 betwen pipe tobacco and other types of smoking tobacco .
 Article 3(1 ) : Determination of rates
 1 . Retail selling prices are influenced by the total tax burden , which
 is made up of the excise duty and VAT .
 Since the total tax burden results from the interaction between the rate
•of the ad valorem excise duty applied to the retail selling price
 ( inclusive of all taxes ) and the VAT rate ( normally applied to the retail
 selling price exclusive of VAT ), the total incidence of these two taxes
 should first be determined on the same basis .
                                                            ./.
 ---pagebreak---                                     - 9 -
 "ember States that currently apply an ad valorem excise duty already do
 this in practice by expressing the VAT rates chargeable on tobacco as a
percentage of the price to the final consumer inclusive of all taxes
 ( see annexed tables ).
2 -.  For the reasons spelled out       in      the Global Communicat ion ( 1 5
the Commission proposes that the tax burdens to be applied should be calculated
on the basis of the arithmetic average of the rates at present charged in the
Member States ( or of their incidence ).
The average rates yielded by this method , which represents the sum of the
rates of the excise duty and VAT are :
- for cigars and cigarillos         :      35%      )  of the retail
                                                     )
- for smoking tobacco               :      55%      )  selling price inclusive
                                                     )
- for snuff and chewing tobacco     :      42%      )  of all taxes
3.    The proposal for a Directive on the approximation of VAT rates provides
for flexibility within a 6   point rate band . Since VAT is invariably
calculated on the basis of   a price inclusive of excise duty , no additional
measure of flexibility can   be introduced for excise duty rates since the
effect of this would be to   allow taxes and prices to differ too widely .
Moreover , since the ad valorem excise duty is calculated on the basis of
a price inclusive of the duty itself and on the basis of VAT , it is necessary
to ensure that the combined effect of the duty and of VAT does not result in
greater flexibility of taxation than is permissible in the case of non ¬
durable products . For this reason , Article 3 of the proposal for a
 Directive does not lay down any precise rates for the excise duty but ,
instead, specifies ranges for the incidence of total taxation ( excise duty
+ VAT). These ranges are limited to one percentage point either side of
the average rates resulting from the arithmetic mean of total taxation .
As in the case of cigarettes , therefore , the element of flexibility available
to the Member States is expressed as a combination of the excise duty and V^T .
 (1)
     COM(87)320 final
                                                         ./.
 ---pagebreak---                                         10 -
4 . Although there is no compelling reason to form a direct link between
the level of taxes on cigarettes and the level of taxes on other
manufactured tobacco products ( except perhaps where tobacco to be used
for handrolling cigarettes is concerned ), the proposed incidence of
taxation and the tax burden would still be much lower here than in the
case of cigarettes . This is consistent , therefore , with the general
approach in all Member States .
5 . In the case of cigars and cigarillos , taxes and prices will rise in
Belgium, Luxembourg , the Netherlands, Germany , Greece and Spain but fall
in the other Member      States .
In the case of smoking tobacco , little change is expected in the Netherlarcs
and Germany while taxes and prices will rise in Belgium , Luxembourg , Soain
and Portugal and fall in the other Member States .
6 . Assuming that overall consumption remains unchanged , total tax revenue
in the Community from cigars , cigarillos , smoking tobacco , chewing tobacco
and snuff is expected to rise : this is because the larger tax increases
occur in the main in those countries where consumption of these products
is concentrated .
 Article 3(2) : Same rate of tax for products in the same g roup
Manufactured tobacco products belonging to the same group are subject net
only to the same structure of duty but also to the same rate . Rates nav ,
therefore , differ from one group to another but not within a particular
group .
This principle merely reaffirms the substance of Article 5(2 ) of Directive
72'464 / EE.C , read in conjunction with Article 1(2 ) of Directive 79 / 32 / EEC .
                                                         ./.
 ---pagebreak---                                          11
The question is whether , in addition to the different proportional rates
that can be applied to the different groups , it would also be necessary
to distinguish between rates within each group , e.g. between pipe tobacco
and other smoking tobacco , between large and small cigars , or between
cigars made of natural tobacco only and other cigars . Since we are
concerned here with proportional rates , such a distinction does not seen
warranted, those rates being applied to retail prices that already take
account of the different production costs that may result from different
characteristics .  Differentiation of rates would also give rise to numerous
problems of definition since " similar " products or substitutes are available
It should also be noted that the VAT rates applicable to the different types
of manufactured tobacco are not differentiated in any country .
Article 4 : Rules for collecting excise duty
Article 6 of Council Directive 72 / 464 / EEC stipulates that the rules for
collecting excise duty are to be harmonized at the final stage at the la', est
Since the purpose of this proposal is precisely to determine that final
stage , the Commission will , at the earliest opportunity , present proposals
relating to the rules for collecting excise duty and to the time allowec
for payment in order to eliminate any distortions of competition arising
from differing practices in this field .
 ---pagebreak---                                                  \ь
                                                                                   ANNEX 1
          Rates of tax on cigars and cigarillos in the Member States
          The table below gives the rates of excise duty and VAT applicable in the
          Member States on 1 April 1987 . The ad valorem duty and VAT rates are given
          in all cases as a percentage of the price to the final consumer inclusive
          of all taxes .
                                                     Excise duty      VAT        Total
Belgium           - cigars weighing 3 kg or more
                     per 1000                          16.50%         5.66%      22.16%
                  - other cigars ( cigarillos )        21.00%         5.66%      26.66%
Luxemburg         - cigars weighing 3 kg or more
                     per 1000                          16.50%         6%         22.50%
                  - other cigars ( cigarillos )        21.00%         6%         27.00%
Netherlands       - cigars weighing 3 kg or more
                     per 1000                            2.93%       16.67%      19.60%
                  - other cigars ( cigarillos )          8.11%       16.67%      24.78%
 France           - cigars / cigarillos with natural
                     tobacco wrapping                  24.50%        25.60%      50.10%
                                                                      0.60%
                                                               ( including BAPSA )
                  - cigars / cigarillos with
                     reconstituted tobacco wrapping    28.20%        25.60%      53.80%
Germany           - cigars weighing 3 kg or more
                     per 1000 ( minimum duty :
                     DM 26 per 1000 )                  14.00%        12.28%     26.28%
                  - other cigars ( cigarillos )
                     ( minimum duty : DM 31
                                      per 1000 )       17.00%        12.28%     29.28%
Italy             - cigars and cigarillos entirely
                     of natural tobacco                24.00%        15.25%      39.25%
                  - other cigars and cigarillos        48.00%        15.25%     53.25%
United Kingdom                          UK£ 47.05 per kg             13.04%     50.00% *
Ireland                                 IR£ 56.289 per kg            20.00%     56.00% *
Denmark                         10% + DKR 198 per 1000               18.03%     40.00% *
Greece                                                   5.00%       26.47%     31.47%
Spain                                                  10.00%        10.70%     20.70%
Portugal                                               26.21%        13.79%     40.00%
♦Estimate of the average incidence for the United Kingdom, Ireland and Denmark .
  Arithmetic mean of the total incidence of tax ( excise duty + VAT ) on cigars and
  cigarillos : 35% .
 Range of rates proposed by the Commission : 34% - 36% of the retail selling price
  inclusive of all taxes .
 ---pagebreak---                                                                            ANNC V ?
                                           ^3
Rates of tax on smoking tobacco in the - Member States
 The table below gives the rates of excise duty and VAT applicable in the
Member States on 1 April 1987 . The ad valorem duty and VAT rates are given
 in all cases as a percentage of the price to the final consumer inclusive of
 all taxes .
                                Excise duty                         VAT      Total
Belgium                             31.5 7.                        5.66 X    37.16 7.
Luxembourg                          31.5 7.                        6.00 X    37.50 X
Nether lands                        10.6 % + HFL 20              16.67 X     56.00 X
                                               per kg
France                              39.5 %                       25.60 %     65.10 X
                                                           ( including 0.6 %
                                                                BAPSA )
бегтапу             " Feinschrrjtt " ( fine-cut tobacco ) :
                          31.8 % + DM 3.40 per kg
                    ( minimum duty : DM 26.00 per kg )           12.28 X     54.00 7.
                    Pipe tobacco :
                          20.70 X + DM 4.20 per kg
                    ( minimum duty :        15.00 per kg )       12.28 X     36.00 %
                    Pipe tobacco containing at least
                    30 % stems and priced at DM 35
                    per kg or less to the final con¬
                    sumer :     DM 6.00 per kg                   12.28 X
                    " Strangtabak " ( twisted pip&
                    tobacco )
                                D;M 4.50 per kg                  12.28 %
                    " Rippentabak "
                                DM 2.00 per kg                   12.28 X
Italy                                56 y.                        15.25 X     71.25 X
 ---pagebreak---                                                                ANNEX 2 ti“.' η *  ·::·_·
                                        in
                                        Excise duty            VAT       Tota 1
 United Kingdom        - J'Handrol l ing tobacco " ( fine-cut
                          tobacco )
                                  UKL 49.64 per kg            13.04 X    70.00 X
                       - Other smoking tobacco
                                  UKL 24.95 per kg            13.04 X    65 . CC    ::
 Ireland               - Pipe tobacco :
                          “ Cavendish " or " Negrohead”
                                  IRL 56.882 per kg           2Ü.G0 y.
                          " Hard pressed "
                                  IRL 36.376 per kg           20.00 y    70 . C c x
                          Other pipe tobacco
                                  IRL 45.726 per kg           20.00 X
                       - Other smoking tobacco
                                  IRL 47.500 per kg           20.00 y                 ·.
 Penmar k               Fine-cut tobacco
                                  DKR 531.00 per kg           18.03 y.    33.00 x
                       Pipe tobacco
                                  DKR 128.90 per kg           18.03 X     5 S. OC     ■:
Greece                               37   %                   2Ó.47 X     63.47       X
Spam                                 20   X                   10.70 y.    3Γ.7 ·: X
Portugal'"                            26.21  V.               13.79 X     40.00 X
* Estimate of the average incidence for the Netherlands , Denmark , United
   Kingdom , Ireland and Denmark .
   No account has been taken of the incidence of tax on certain German tobaccos
   that are consumed only locally .
   Arithmetic mean of the total incidence of tax ( excise duty + VAT ) on smoking
   tobacco : 55 X
   Range of rates proposed by the Commission : 54 X - 56 % of the retail sell in
   price inclusive of all taxes .
 ---pagebreak---                                                                               ANNEX 3
           Rates of tax on snuff and chewing tobacco
           The table below gives the rates of excise duty and VAT applicable in the
           Member States on 1 April 1987 . The ad valorem duty and VAT rates are given
           as a percentage of the price to the final consumer inclusive of all taxes .
                                                    Excise duty          VAT       Total
 Belgium                Chewing tobacco
                        Snuff                          31.50%           5.66%     37.16%
 Luxembourg             Chewing tobacco
                       Snuff                           31.50%           6%        37.50%
 Netherlands           Chewing tobacco
                       Snuff                     10.60% + HFL 20       16.67%     56.00%
                                                            per kg
 France                Snuff                           33.40%          25.60%     59.00%
                       Chewing tobacco                 21.60       ( including    37.20%
                                                                     BAPSA *)
 Germany               Snuff                     DM 0.65 per kg
                       Chewing tobacco                                12.28%      20.00% *
                           " Kau-Feinschnitt     DM 5.30 / kg
                           Other                 DM 0.65 / kg
 Italy                 Chewing tobacco                 27%            15.25%      42.25%
                       Snuff
United Kingdom        Chewing tobacco          UK£ 24.95 per kg       13.04%      50.00% *
                      Snuff                           0                           13.04%
Ireland               Chewing tobacco         IR£   47.500per kg      20.00      70.00% *
                      Snuff                           0                          20.00%
Denmark               Snuff                          39%              18.03%     57.03%
                      Chewing tobacco                23%                         41.03%
Greece                Snuff               )
                                                     60%               3.85%     63.85%
                      Chewing tobacco     )
Spain                                                25%             10.70%      35.70%
Portugal                                             16.21%          13.79%      30.00%
♦Estimate of the average incidence for the Netherlands , Germany , the United Kingdom and
 Ireland .
 Arithmetic mean of the total incidence of tax ( excise duty + VAT ) on chewing tobacco
 and snuff : 42% .
 Range of rates proposed by the Commission : 41% - 43% of the retail selling price
 inclusive of all taxes .
 ---pagebreak---                                   Proposal for a
                                 Council Directive
                          on the approximation of taxes
                 on manufactured tobacco other than cigarettes
   THE COUNCIL OF THE EUROPEAN COMMUNITIES ,
   Having regard to the Treaty establishing the European Economic Comnun^v ,
   and in particular Article 99 thereof .
    Having regard to the proposal from the Commission ,
    Having regard to the opinion of the European Parliament ( 1 ),
    Having regard to the opinion of the Economic and Social Committee ( 2 ),
  Whereas Council Directive 72 / 464 / EEC ( 3 ), as last amended by Directive 86/246/£EC,(4)
   sets out in Title I general provisions relating to excise duties applicable to all
  groups of manufactured tobacco ;       whereas special provisions relating to
  cigarettes have already been adopted in Title II of that Directive ;
  whereas special provisions still have to be adopted for other manuf actured
  tobacco products ;
  Whereas Council Directive 79/ 32 / EEC ( 5 ) lays down the
  definitions of the different types of manufactured tobacco ;
  Whereas, in order to establish an internal market without frontiers, the structures of
  excise duties and VAT need to be harmonized and their rates brought more
  closely into line ;
  Whereas   in the case of manufactured tobacco other than cigarettes , an
  . xcise duty structure proportional to the retail selling prices is the
  structure best suited to achieving that objective ;
 7T5
   (2)
( 3 ) OJ No L 303 , 31.12.1972 , p. 1
( 4 ) ÜJ No L 164, 20.6.1986 , p. 26
( 5) OJ No L 10, 16.1.1979, p. 8
 ---pagebreak---                                      -а-
Whereas a proportional excise duty displays special characteristics ,
notably with regard to its multiplier effect in combination with VAT ;
whereas , therefore , the incidence of the sum of the rates of those two
taxes should be harmonized as a proportion of the retail selling prices
of the products in question;
Whereas the incidence of taxation should be harmonized in the case of
all products belonging to the same group of manufactured tobacco ;
 ---pagebreak---                                       -Ъ-
HAS ADOPTED THIS DIRECTIVE :
                                   Article 1
The following groups of home-produced and imported manufactured tobacco
shall be subject , in each Member State , to an ad valorem excise duty
calculated on the basis of the maximum retail selling price of each
product , freely determined by manufacturers and importers in accordance
with Article 5 of Directive 72/ 464/ EEC:
( a ) cigars and cigarillos ;
( b < smoking tobacco ;
( c ) chewing tobacco ;
( d ) snuff .
                                   Article 2
For the purposes of this Directive , the definitions of the products
referred to in Article 1 shall be those laid down in Articles 2 , A , 5 , 6
and 7 respectively of     Directive 79/ 32/EEC.
                                   Article 3
Not later than 31 December 1992, each Member State shall
apply an ad valorem rate of excise duty in such a way that the total tax
burden resulting from the combination of the excise duty and VAT is :
      - for cigars and cigarillos :         between 34% and 36%
                                                                    of the retail
      - for smoking tobacco :              between 54% and 56%    j selling once
                                                                    inclusive of
                                                                  , all taxes .
      - for snuff and chewing tobacco :    between 41% ..- nd 43%
 ---pagebreak---      These rates shall be effective for all      products belonging to the
group of manufactured tobacco concerned , without distinction within that
group as to quality , presentation , origin of the products , the materials
used , the characteristics of the firms involved or any other criterior .
                                 Article 4
The provisions relating to the arrangements for collecting the duty and
the time allowed for payment shall be laid down before 1 January 1°?° m
Directives adopted by the Council acting on proposals from the Commission .
                                 Art i c le 5
Member States shall bring into force the laws , regulations and admir i    r3~ - v?
provisions necessary to comply with this Directive not later than 51 D ecember 199
They shall forthwith inform the Commission of any provisions of na ; ;       law
which they adopt in the field governed by this Directive .
                                 Article 6
This Directive is addressed to the Member States .
Done at Brussels                                    For the Council
                                                    The President
 ---pagebreak---                                 FICHE D' IMPACT SUR LA COMPETITIVITE ET L' EMPLOI
                      Rapprochement des taxes frappant Les tabacs manufacturés autres
                                                 que Les cigarettes
        Caractéristiques des entreprises concernées
        Les industries du cigare , du tabac à fumer , à priser et à mâcher sont sur ¬
        tout concentrées dans Les pays du BeneLux et en R. F. A. ( pLus de 70 X des ci ¬
        gares et pLus de 80 7. du tabac à fumer de La CEE ). IL s' agit en fait de di ¬
        verses industries distinctes et indépendantes de ceLLe des cigarettes bien
     . que certaines entreprises qui fabriquent des cigarettes produisent parfois
        également des cigares et du tabac à fumer ( notamment dans Les pays à monopoles ).
        En ce qui concerne Le tabac à fumer , Les fabricants sont surtout de grosses
        entreprises qui n' ont en général par Le caractère de PME . La situation est
       différente dans Le secteur des cigarillos et surtout des cigares où L' on
        retrouve encore des PME .
                Dans La C.E.E. , Les taxes sont extrêmement variées : Leur incidence
        se situe selon les pays entre 22 X et plus de 70 X des prix de vente au détail .
                La consommation de ces produits , par tête d' habitant , est La plus
       élevée dans les pays à forte production ( BeneLux , R. F. A. ) qui connaissent
       d' ailleurs une charge fiscale moins élevée que celle des autres pays .
  I. Voir fiche cigarettes
 II . Voir fiche cigarettes
III . Voir fiche cigarettes
 IV- Quel est l' effet prévisible ?
       La proposition de directive augmentera la compétitivité entre les entreprises .
       Comme pour les cigarettes , les nouveaux taux proposés pourront entraîner des
       changements plus ou moins importants dans plusieurs Etats membres .
                Pour les cigares et cigarillos , les taxes et les prix augmenteront en
       B, L, NL, RFA , Grèce et Espagne , alors que les taxes et les prix diminueront
       dans les a'utres pays .
 ---pagebreak---                                        - 2 -
             Pour les tabacs à fumer l' incidence fiscale changera peu en NL et
   RFA, les hausses se situeront en B, L , ESP, P et les baisses dans les autres
   pays .
             L' industrie cigarière PME connaît un déclin même dans les pays à
   faible taxation . Ce déclin peut difficilement être imputé à la seule taxa ¬
   tion , mais semble plutôt résulter des coûts de production ' élevés ( main
   d' oeuvre plus intensive que pour cigarettes et niveau élevé des investis ¬
   sements ) .
V. Voir fiche cigarettes .