CELEX: 51976PC0022
Language: en
Date: 1976-02-04
Title: PROPOSAL FOR A COUNCIL DIRECTIVE amending Directive N°. 72/464/EEC, as amended by Directives N°s, 74/318/EEC of 25 june 1974, and 75/.../EEC of 18 December 1975 on taxes other than turnover taxes which affect the consumption of manufactured tobacco (submitted to the Council BY the Commission)

ARCHIVES HISTORIQUES
DE LA COMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (76) 22
Vol. 1976/0012
 ---pagebreak--- Disclaimer
Conformément au règlement (CEE, Euratom) n° 354/83 du Conseil du 1er février 1983
concernant l'ouverture au public des archives historiques de la Communauté économique
européenne et de la Communauté européenne de l'énergie atomique (JO L 43 du 15.2.1983,
p. 1), tel que modifié par le règlement (CE, Euratom) n° 1700/2003 du 22 septembre 2003
(JO L 243 du 27.9.2003, p. 1), ce dossier est ouvert au public. Le cas échéant, les documents
classifiés présents dans ce dossier ont été déclassifiés conformément à l'article 5 dudit
règlement.
In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983
concerning the opening to the public of the historical archives of the European Economic
Community and the European Atomic Energy Community (OJ L 43, 15.2.1983, p. 1), as
amended by Regulation (EC, Euratom) No 1700/2003 of 22 September 2003 (OJ L 243,
27.9.2003, p. 1), this file is open to the public. Where necessary, classified documents in this
file have been declassified in conformity with Article 5 of the aforementioned regulation.
In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom 1.
Februar 1983 über die Freigabe der historischen Archive der Europäischen
Wirtschaftsgemeinschaft und der Europäischen Atomgemeinschaft (ABI. L 43 vom 15.2.1983,
S. 1), geändert durch die Verordnung (EG, Euratom) Nr. 1700/2003 vom 22. September 2003
(ABI. L 243 vom 27.9.2003, S. 1), ist diese Datei der Öffentlichkeit zugänglich. Soweit
erforderlich, wurden die Verschlusssachen in dieser Datei in Übereinstimmung mit Artikel 5
der genannten Verordnung freigegeben.
 ---pagebreak--- COMMISSION OP THE EURQPEAN
                                                      COM (7 6 ) 22 final.
                                                      Brussels , k February 1976
                      PROPOSAL FOR A COUNCIL DIRECTIVE
              amending Directive N°. 72/464/EEC, as amenden by
              Directives N ° s , 74/318/EEC of 25 june 1975 » and
              75/«»» /EEC of 18 December 1975 on taxes other
              than turnover taxes which affect the consumption
              of manufactured tobacco
                ( submitted to the Council BY the Commission )
   COM (76 ) 22 final .
 ---pagebreak---                                    EXPLANATORY MMORAEDUM
I.      Introduction
In accordance with the Council Directive of 19 December 1972              , as
amended by the Council Directives of 25 June 1974^^ and 13 December, 1975^^
the first stage of harmonization of the structures of the excise duty on
manufactured tobacco covers at present a period of 48 months from
1 July 1973 to 30 June 1977 *            This first stage concerns the excise duty
on cigarettes only .           Apart fron certain general provisions on the principles
of harmonization , the Directives do not contain any specific provisions
concerning other manufactured tobaccos .
Article 1 ( 3 ) and (4 ) of the above Directive provides that the Council ,
acting on a proposal from the Commission , must adopt a Directive at least
one year before the expiry of the first stage , i.e. , before 1 July 1976 j
laying down the special criteria applicable during the following stage
or stages .
This proposal for a directive concerns the provisions applicable during
the second stage of harmonization of the structure of the excise duties
on cigarettes .          It does not concern manufactured tobacco other than
cigarettes .
II .      Background
     A *»  A    • ^ «1 A   • 1       1 q  n  > 1       m , ♦
On 21 April 1970 » the Council adopted a Resolution '            concerning taxes
other than turnover taxes which affect the consumption of manufactured
tobacco .         At that tine , two excise systems for the taxation of cigarettes
'-^OJ ¥0. L 303 , 31 Decernber 1972
(2 ^0J lio. L 180, 3 July 1974
^OJ No .
           Ho . C 50/1 , 28 April 1970.
                                                                                 /■
 ---pagebreak--- existed in the Community of the Six .      In Germany , a specific excise was
levied as a fixed amount per cigarette ;      in the five other Member States ,
the excise was levied as a percentage of the       tax-inclusive retail price .
The Council Resolution of 21 April 1970 provided that both these systems
should be combined in a . harmonized system consisting in part of a
proportional component and . in part of a specific component .     The Council
Resolution did not fix the relationship bettireen the two components , but
provided that at the final stage of harmonization , beginning 1 January 19*30 ,
the . relationship should bo such that the range of retail prices would
reflect fairly tho difference in the manufacturers' deliver;.' prices .
These provisions of the Resolution were embodied in the Council Directive
of 19.12.1972^^. The Directive also established that a first stage of
harmonization would run for. two years from 1.7.1973 .      Durin^ thir, stage ,
and without prejudice to the ratio finally to be adopted , the specific
                        •» »
component of the excise to be levied on cigarettes was fixed at not less
than 5fc ctfid net more than 75/'° of the aggregate anount of the ad valorem
and specific components .
The Council Directive was of course adopted prior to the enlargement of
the Community .    Hovjever , during discussions on tho Directive , two of the
new Member States , Ireland and the United Kingdom , pointed out that their
excise system for taxing cigarettes , which was levied on the weight of
the raw tobacco , differed from both of the systems applied in the original
six Member     States . They represented that the directive would radically
alter their markets for cigarettes and that a period of derogation would
be essential .    Both these countries were therefore accorded a derogation
from the Directive until the end of 1977 *      Thus seven of the nine Member
States Implemented the first stage of harmonization by 1 July 1973 «
^ 'QJ No. L 303 , 31 December 1972.
 ---pagebreak--- Discussions held during 1973 j with a view to a second movement towards
alignment of these different tax systems , proved abortive . In addition ,
the Commission itself felt that the accentuation of the different market
conditions resulting from the enlargement of the Community required
further examination before concrete proposals for a second stage could be
put forward. The Commission therefore proposed , in March 1974 » a twelve­
month prolongation of the first stage , to 30 June 1976 » in order to provide
more time for the search for a Satisfactory solution . A prolongation had
the additional advantage of permitting the effects of the first,, stage to
be assessed before further proposals were put forward. The Council
adopted the twelve-month prolongation in. its Directive of 25 June 1974^"^.
The Commission also submitted in Ilarch 1974 a draft second Directive on
                                    2
harmonization of tobacco excises      , which specifies the groups of products
into which manufactured tobacco is to be divided within the harmonized
systom , and defines the characteristics of each product group .     The
Economic and Social Committee and the European Parliament gave their,
opinions on the proposals in July and November 1974 respectively^^.
The Commission attaches some importance to the prompt adoption of this
Directive , since it is manifest that progress in harmonizing other aspects
of the tax structure should be matched by the adoption of uniform product
groups and definitions .   If this is not the case , inconsistencies in the
coverage of the tobacco taxes may emerge as harmonization progresses .
The Commission also notes that both the European Parliament and the
Economic and Social Committee re cent lj^ deplored the Council * s failure
                                4)
to adopt the Second Directive ^ -, and urged the Council to do so without
delay .
'^OJ No. L 180, 3 July 1974
(2 W No. C 72, 27 June 1974
(-^OJ.No. C 125 , 16 October 1974 (ECS) 0J lío. 155, 9 December 1974 (EP)
v ''CJ ( Resolutions on second prolongation ).
   0J No . C. 239 , 20 October 1975 .
 ---pagebreak---                                     - 4 -
Late in 1974 , the Commission authorised, a study by consultants into the
likely effects on demand for cigarettes of "black and blond tobaccos sold
on Community markets in response to changes in the system of taxing
manufactured tobaccos .  The study examined three alternative excise
structures for cigarettes :  a structure with a high specific component ;
a structure with a high ad valorem component ;   and a structure combining
substantial ad valorem and specific components .   The consultants received
a high level of co-operation and. much data from tobacco producers
throughout the Community .  They also discussed their estimates of the
probable effects of each of the three alternatives with the major
cigarette producers .
The report on the study concluded , inter alia , that over the Community as
a whole , harmonization on a predominantly ad valorem structure seemed
likely to produce less disturbance in the short term to existing market
patterns than would either of the other two alternatives examined .
However , it was also concluded that there are grounds for the view that a
structure combining at the final stage substantial elements of both ad
valorem and. specific taxation would increase the possibility of increased
inter-penetration of markets .   The precise ratio of specific to ad valorem
taxation which would create balanced opportunities for such inter­
penetration would require further study .   The report also referred to
concern expressed by private sector producers at the pressure on profit
margins and product quality of a predominantly ad valorem structure , and
concluded that further study was necessary in order to evaluate such
problems .,
These conclusions are of course the responsibility of the authors of the
study , and in no way commit the Commission ,  Nevertheless , the Commission
considers that the study contributes usefully to discussion of tobacco
excise harmonization , and has taken its findings into ^account in the
preparation of the present proposals .   The study will be published as
soon as possible .
                                                                   /.
 ---pagebreak---                                     - 5 -
III .  The general lines of the proposal
Broadly , the choice for future proposals appears to lie "between the
alternatives of continued prolongation of the first stage pending
agreement on the . final structure , slow progression via a large number
of modest stages , or moving as soon as possible ( i.e. , from 1 July 1977 )
to a second stage requiring substantial increases in the minima for
both the ad valorem and specific components . The first course has so
far proved fruitless# The second would prolong the excise harmonization
process far into the future ,, Such a process would expose producers in
particular to continuing uncertainty both as to the final outcome and as
to each succeeding stage , and would inevitably inhibit product and
investment planning over a lengthy period. Moreover , successive small
steps would provide only a gradual stimulus towards market inter­
penetration . The third course seems likely to provide an immediate
stimulus to market interpenetration . Ey- reducing substantially the
spread between the permitted minimum and maximum percentages for both
the specific and ad valorem components , it would appreciably narrow the
gap to be bridged at the final stage , but would leave a margin for
manoeuvre at the final stage , to be used in the light of experience during
the second stage . % comparison with the second alternative , it would
greatly reduce both the degree and the period of uncertainty for
producers .   The Commission proposals are therefore based on the third
choice above .
TV .  The absence of proposals for the final stance         .
The European   Parliament , in its opinion on the proposal for a second
prolongation   of the first stage , urged the Commission to submit proposals
for a second   and subsequent stages as soon as possible . The Commission
understands ,  and indeed shares , the concern to reduce uncertainty over
future harmonization to a minimum . This is clearly desirable . Reference
has already been made to the inhibiting effects on long-term planning of
continuing- uncertainty over 'the future path of excise harmonisat'ion. The
question of v/hether or not the present proposal should , in addition to the
second stage provisions , include provisions for the final stage , has
therefore been carefully considered.
                                                                   ./•
 ---pagebreak---                                        - β -
  Unfortunately , discussions to date have merely demonstrated the persistent
  divergence of viewpoints on the relationship to apply at the final stage
 "between the specific and ad valorem elements- "in a hairoenizedr excise , '
  Little or no change has "been remarked in the differine; viewpoints during
  discussions over the last two years .    The likelihood of agreement on a
 proposal for the final stage is therefore slim at the present time .
 Moreover , to submit such a proposal now would run counter to the concept
  of progressive harmonization .   If such a proposal were adopted , it would
  commit the Community to the f-inal stage in advance of the experience of
 the second stage .   In other words , if harmonization is to progress with
  some flexibility and in the light of experience , some degree of uncertainty
  is an unavoidable consequence .   Finally , the report of the study     to which
 reference has already been made , suggests that the final stage requires
  further study on a variety of counts before proposals are formulated .
 For these reasons , the Commission has concluded that its present proposal
  sh^u^.d be confined to the second stage .    Hov/ever , as has already been
 por.rned out , the proposal is intended to reduce both the period and degree
  of uncertainty by as great a margin as is practicable .
 V,   The length of the second sta:-:e
  It is proposed that the second stage should run from 1 July 1577 to
  31 December 1930 - a period of 3a" years .    A third and final stage would
 therefore commence on 1 January 1921 *      This date is 12 months, later than
 the deadline of 1 January 19G0 originally fixed by the Council ir its
 resolution of 21 April 1970 .    However , the
  successive prolongations cf the fipst c;tage have made it extremely-
 difficult to meet that deadline whilst at the same time permitting a
 relatively smooth transition from the existing situation .        A second stage
 of significantly less than 3s" years duration would oblige the Corliss ion
 to begin preparation of proposals for the final stage before the f.ll
 effect of the    second stage proposals had been felt in all Hember - tites ,
 since Ireland and UK , by virtue of their derogation until 31 Tecem' er X>11. a.te
unlik^V to begin the harmonization process until six months after the proposed
 ---pagebreak---                                       - 7
commencement date for the second stage .    As both -these- countries at
present apply an excise which is neither proportional by value nor
specific by unit and have not even -undergone the effects of the first
stage of harmonization , it i3 of particular importance that harmonization
in these two countries should be given time to have its full effect before
measures for the final stage are prepared .    In view of these    considerations ,
the Commission feels that a second stage of the period proposed is
essential .
VI •   Inclusion of VAT in the ad valorem component
In the first directive of 1972 it was provided that the specific component
in the excise duty should be determined by referenoe to the sum of the two
components of the excise duty ( specific component plus proportional
component ).   It is now proposed , for the second and subsequent stages ,
that the specific component should be cal ciliated by reference to the total
tax levied on consumption of cigarettes ( specific component plus
proportional component plus proportional VAT ).
In a mixed excise duty system such as that established for cigarettes ,
VAT , which is a proportional tax by definition , modifies all the
relationships , since the proportional component of the excise duty is
calculated on the basis of a retail selling price , inclusive of all taxes ,
( i.e. , the specific and proportional excise component and also VAT ). The
incidence of VAT on retail selling price , although of course much less than
that <f the excise , nevertheless varies appreciably from one country to
another . A table of VAT rates is attached at Annex 1 . Thus , it appears
essential that    the size of the specific component of the rilixed excise
duty should "ha fixed , not in relation to the total excise duty , but in
relation to the total tax levied on consumption ( excise duty + VAT ).
 ---pagebreak--- VII# The proposed specific/ad valorem relationship during the second
      stage
The Commission has "been informed by : the Ilenber States that the provisions
relating to the . first, stage ( specific component equal to between       and.,
75^ of the total excise duty ) have not appreciably affected either the .
tax revenues or the market conditions in the seven Member ..States in which
these provisions are currently applied. . In fact , this range broadly
reflects the situation which obtained in the original six Member States :
five Member States each undertook an alignment of 5f° (0 to 5%) , whilst
one undertook an alignment of. 25fo ( lOCffo. to 75/^)>    a result of its
accession to the Community , Denmark brought the specific excise component
to 75$ ( the United Kingdom and Ireland having obtained        deferment until
31 December 1977)#
The extent to which the permitted variation in the specific component
should be compressed during the second stage depends upon a variety of
considerations . First , the Commission envisage a relatively long . second
stage which will in practice be the last stage before the final
harmonization of structures .     Secondly , the reduction in the permitted
variation in the specific component ( and consequently ., the increase in
the required minimum percentage      for both the specific and ad valorem
components ) should be sufficiently great to offer a marked stimulus to
market interpenetrat ion , since the prospect of increased export markets
in return for possible reductions in domestic market nhares is in itself
likely to contribute towards an agreed solution . For these two reasons ,
the  movement towards a fixed ratio should therefore be considerable .
Thirdly , if the impasse encountered in past discussions on the final stage
is to be avoided j the movement during the second stage should not be so
great as to predicate the final structure . Fourthly , the movement should
be of broadly comparable magnitude for all Member States . (The UK and
Ireland could constitute a special case .       If they use their derogation to
the full , they will have to move directly to the second stage in one step
at the end of 1977 )* These considerations , if taken alone , would suggest
that the specific component in the second stage should be not less than
20$ and not more than 6Cffo of the excise .
 ---pagebreak---                                         - 9 -
However , the proposal to calculate the percentage of the specific
component "by, reference to the total tax burden ( excise + VAT) end to
include VAT within the ad valorem component considerably modifies this
judgement .   All other things being equal , those countries at present
applying the maximum permitted specific component will find that inclusion
of VAT within the calculations will offset to some extent the reduction in
the specific excise .    Consequently , the adaptation required will be less
in practice than it appears .    33fcr contrast , those countries at present
applying the minimum permitted specific component will find that inclusion
of VAT within the calculations will augment the adaptation which they are
required to make in the second stage .
Consequently , a proposal for the second stage to reduce the permitted
variation in the specific component ( at present , between 5i° and 75$ °f
the excise , exclusive of VAT ) by an equal figure at both ends , would
oblige certain Member States to mr.lce a much greater adaptation than others .
This . imbalance could be broadly corrected . .by an asymmetric reduction in the
specific range which would ensure comparable movements "by all the
Member States .
For these reasons , it is proposed that the permitted percentage range for
the specific component during the second stage should be         not less than
 15$ and not more than 50$ of the total tax burden ( excise + VAT ). The
changes in tax structures which Member States could be expected to make in
response to these provisions are shown in Annex 2 .
VIII ,   Comments' on the articles
Article 1                                 •
This Article provides that account shall be taken of VAT in the inclusion
of the excise , so that the specific component is determined by reference •
to the total tax levied ( specific excise component + proportional excise
component + proportional VAT ).
Article 2
Eo comment •
                                                                          •A
 ---pagebreak---                                    - 10 -
Article 3
This Article introduces a new heading " Title III" concerning the special
provisions applicable during the second stage of harmonization .
Article 11 ( new )
The first stage of harmonization provided for in Article 7 of the
Directive of 19 December 1972 has already been twice extended by 12
months , and now covers a period of 43 months up to 30 June 1977 •   This
Article provides that the second stage shall run for 3a years , from
1 July 1977 to 31 December 1900 .
Article 12 ( new )
Paragraph 1
This paragraph incorporates the principle previously laid down in
Article 8 ( l ) of the Directive of 19 December 1972 , but also takes into
account a possible change in the most popular price category for cigarettes .
Such a change in the most popular price category could as well stem from
a change in consumer tastes as from a change in prices .    Subject to the
requirement for annual review and , if necessary , amendment , the
possibility of aprice change requiring an immediate tax change will be
avoided .
Paragraph 2
This provision replaces Article 8 ( 2) of the Directive of 19 December . 1972 5
which established for the first stage of harmonization a specific component
of between 5% and 75% of "the total excise .  Paragraph 2 provides that the
specific component in the second stage shall be between 13$ and 50$ of the
total tax burden ( i.e. , excise + VAT ).
Para, ;rarh 3
A similar provision is already applicable during the first stage .
                                                                      ,
 ---pagebreak---                                    - 11 -
Paragraph 4
This provision already applies during the first stage .
The right to exclude customs duties from the basis 011 which the
proportional component is calculated is contrary to the general prinoiple
laid down in Article 4 ( l ) of the Directive of 19 December 1972 . However ,
as a transitional measure , this right may also be retained during the
second stage .
Paragraph 5
This provision already applies during the first stage .
Background da+a
Also attached for information are Annexes rhowing :-
Annex 3 :   Spread of retail prices of cigarettes in each Member State ,
Annex 4 *   Retail price in each Member State of the most popular cigarette ,
            and fiscal burden .
Annex 5 :   Cigarette consumption , and proportion imported .
 ---pagebreak---                                               JLKÎIEX I
                VAT on cigarettes
                                  on the retail price
                                  ( all taxes included)
                                            5.60fo
BELGIUM
                                            2    f>
LUXEMBOURG
                                           12.23$
BETHERLANDS
                                            9.91#
GERMANY
                                            6 .96^
FRANCE
                                           15.25?°
 ITALY
                                           13.04$
 DENMARK
                                             7.4 $
 UNITED KINGDOM
                                             6.32$
  IRELAND
 ---pagebreak---                                                                                                          AMEX II
               Application by the Member States of the directive of 19.12.72
               ( first stage of harmonisation ) and the situation resulting
               from the draft directive ( second stage of harmonisation )
               Respective parts of the specific and ad valorem components v ' in
               the taxation of cigarettes in the most popular price category
                               Situation at 1.9*75                                           Proposed ibr 1.7.77
                                 (First stage )                                                   ( Second stage )
                                 Excise                 VAT      ;     Total tax                  Total tax
                                                                 I
                                                                       ( Excise + VAT )           (Excise + VAT )
                                                                                                       !    '        - -
                     Spécifie              Ad.val .   Ad . val .       Spec .    Ad . val .    Spécifie        Ad . val ,
                     between               between       lOCffo                               "between         between
                     5 $ and               95$ and                                            15$ and          85$ and
                     75$                   25$      i
                                                    l
                                                    l
                                                                   i           i          •
                                                                                              50$              50$
                      ($ )                    ($)                      ($ )       ($ )            ($ )         ($ )
I France                  5                95                            4.5      95,5         15              85
   Italy                  5                95                            4        96           15              85
I Belgium .         •     5.3       ••     94.7                          4.3'     95.2     •   15              85
   Luxembourg             4.8 < 2 )        95.2           0)
                                                                         4.7      95.3         15 :            85
I Netherlands             4.6(2 )          95.4
                                                          M
                                                          O
                                                        1–I              3.7.     96.3         15              85
   F.R.G.               74.1             ! 25.9           >          ' 63.6   1 36.4           50            : 50
I Denmark               74.4             ! 25.6     IU    *            62.8       37.2         50              50
   United                                               b"
   Kingdom            10CT 4 '                          o
                                                                       89.8       10.2        - <4              - (4
 I Ireland            100^                 L_                          SI          9                            -( 4 )
                    11 1 um 11  nrr -  •)
   ( 1 ) The specific component is a fixed sum per cigarette .
         The proportional component is calculated on the retail price .
   ( 2 ) In the Grand-Duchy of Luxembourg and in the Netherlands the specific
         component no./longer represents 5$ °f the excise .
   ( 3 ) On the assumption that each Member State makes the smallest change
         permissible .
   (4 ) At present in the United Kingdom and Ireland , the excise is based on the
         weight of the raw tobacco ( derogation until 31.12.77 ).
 ---pagebreak---                                             I                    AJMKX. III
                                           i
             Spread of retail prices for cigarettes in
                            each Member State
             . ( index 100 ® most popular price class )
300
275
250
2^5
200
175
15Q
125
100
75
50 ;     Β       Lux.   Neth . .  PEG           It .  Dk    UK .     Irl .
Cigarettes of the most popular price class; ( injdex 100 ) represented
   '                     •'      in 1974 :     ' •;        '
Belgium                                 of cigarette sales
Luxembourg                                      ft.   f»
Netherlands                        757°        Il     If
                                                      tf
Germany                                        *1
                                                      ft
Prance                                         ff
                                                      If
Italy                                          ft
                                               f«     It
Denmark
United Kingdom                                 It     ft
Ireland                            30% «       If     fl
 ---pagebreak---      \
                                                                      ANNEX IV
^ itualnon in
August 1975
                       Retail prices of cigarettes of the most
             popular price class and tax burden or. those cigarettes
Retail price per 20 cigarettes                          Tax "burden ( excise + VAT )
                     h
                     in u.a .                                    - in u.a .
 j_Denmark : 9*9,^ Kr. = 1.40 u.a.
                                                    Denmark : 83*8^              1.17 u
   Germasny :        2.30 DM « O.75 u.a .
   UK "              41.5 p . » 0.72 u.a.
   Ireland :    •'   34 p.    » O.59 u.a .
                                                 I Germany          lOfo     0.53 u.a
   Netherlands : 2 Fl.(25 ) = 0.51 u.a.(20)      roK               70.3*     0.51 u.a.
   Belgium :        27 Fr.(25 ) = 0.47 u.a.(20 )
   Italy.: :       350 Lire   = 0.43 u.a.          Ireland :       70.3% = 0.41 u.a,
   Luxembourg : 2! Fr.( 25 ) » 0.41 u.a.(20 )      Netherlands : 67%        0.34 u.a .
  France :          1.70FF .  = 0.33 u.a.          Italy : 74 ./$           O.32 u.a .
                                                   Belgium :       67$      0 o 31 u.a .
                                                   France : 72.7^           O . 24 u.a .
                                                   Luxembourg : 60.8"£      0.22 u.a .
 ---pagebreak---                                                                                                                         AKNEX V
                                       Consumption of cigarettes (millions ) in - the Community
                                                   1211                                                im
                             Total     . Part supplied by imports                   .Total     Part supplied by imports       10  •
                                          ' all         of which   imported
                                                                                                  all        of which      imported
                                         sources           EEC
                                                                                               sources         EEC
Belgium – Luxembourg        20,236         2,009         2,002        9-9$           20,243      2,051        2,047         10.1$
Netherlands                 23,423         6,111         3,612       2&fo            23,423      3,074        7 , 745       34.4/o
Germany                 I 125,461    I         970         779        O.Tfo        128,017       1,255        1,005          0.9$
Prance                  I   75,379         5,695         5,675        1-5$           30,492      6,554        6,513          8.1$
Italy                       80,151       14,156         14,144       17.7$           87,439    21,455        21,406         24.5$
United Kingdom :           137,400 .       1,941         1,019        1.4$         137,000    , 2,020         1,533          1.5$
Ireland                 I     6,802            128         100        2$              7,405'   .   298            215        4$
Denmark                 II    7,603  I M54                 500       15*1%            6,796        789            350       11.6$
   \
Community tot all          476,460       32,194         27,831        6.'757'      490,875     42,496        40,814          8.65%
World (estimate ). - 3,500,000
                           More than 86$ of imports                                          More than 96$ of Imports
                           are of Community origin                                           are of Community origin
                     V
                                             «  *
 ---pagebreak---                  Proposal' for a Council Directive of
                     amending Directive Uo« 72/464/EEC
              on taxes other than turnover taxes which affect
                  the consumption of manufactured tobacco
THE COUNCIL OF THE EUROPE/JT COISIUIIITIES ,
Having regard to the Treaty establishing the European Economic Community ,
and in particular Articles 99 and- 100 thereof ,
Having regard to the proposal from the Commission ,
Having regard to the opinion of the European Parliament ,
Having regard to the opinion of the Economic and Social Committee ,
Whereas , in accordance with Council Directive No, 72/464/EEC^^ of
19 December 1972 , as amended by Directives Nos. 74/31'3/SEC of 25 June 1974^^
and 75/ /EEC of            18 December, 1975^^ on taxes other than turnover
taxes which affect the consumption of manufactured tobacco , the Council
must , before 3^ June 1976 , adopt a Directive laying down the special
criteria applicable after the first stage , covering , subject to
Article 1 ( 4 ), a period of 48 months from 1 July 1973 ?
Whereas , the special criteria applicable during- the first stage have
permitted an initial approximation of the structures of the excise duties
on cigarettes in seven of the nine Ilember States , without the tax revenue
of the llenber States or the conditions on their markets being appreciably
affected :
^ '0J lio. L 303 , 31 December 1972 , p. 1 and
( 2 ;0J No. L 130, 3 July 1974 , p. 30
^OJ No .
                                                                  •/.
 ---pagebreak---  Whereas the United Kingdom and Ireland , by virtue of Article 12 of
 Council Directive No . 72 /464 /EEC of 19 December 1972 , nay defer
 application of "the above Directives unti }. 31 December 1977 and that these
 Directives have . not" yet , therefore ,' had any practical effect in those- two
 Mcnbor Str;t^s;'        "•
Whereas the structure of the excise duty on cigarettes must include , in
addition to a specific component calculated per unit of the product , a
proportional component based on the retail selling price , inclusive of
all taxes ;   whereas account should be taken of the fact that the VAT
applicable to cigarettes has the same effect as a proportional excise
duty by fixing the relationship between the specific component of the
excise and the total tax burden ;
I'Jhereas it is necessary to lay down the special provisions applicable
during a second stage in such manner as to orientate the excises applied
to cigarettes by the Henber States towards a common structure ;
VJhereas the structure of the excise duty on manufactured tobacco other
than cigarettes will be determined at a later date ;
HAS ADOPTED THIS DIRECTIVE :
 ---pagebreak---                                    Article 1
Article 4 ( 3 ) of Council Directive 17o , rJ2//[r SA/ZEG of 19 December 1972 ,
is amended as follows :
"3.  At the final stage of harmonization of structures , the same ratio
     shall he established for cigarettes in all Member States between
     the specific excise duty and the sum of the proportional excise duty
     and of VAT , in such a way that the range of retail selling prices
     reflects fairly the difference in the manufacturers 1 delivery prices"
                                   Article 2
Title III and Articles 11 , 12 and 13 of the Council Directive of
19 December 1972 become Title IV and Articles 13 , 14 and 15 respectively .
                                   Article 3
The following neu Title III is inserted in the Council Directive          of
19 December 1972 :
                                 " Title III
          Special •provisions applicable during the second strge
                              of harmonization
                                   Article 11
1 . Without prejudice to the application of Article 1 (4 ) s the second
    stage of harmonization of the structures of the excise duty on
    manufactured tobacroo shall cover the period from 1 July 1977 "to
    31 December 1930 .
2 . During this second stage of harmonization , Article 12 shall be
    applicable .
 ---pagebreak---                                     - 4 -
                                 Article 12
1.  The amount of the specific excise duty levied on cigarettes shall "be
    established by reference to cigarettes in tlxe iciest popular price
     category according to the data available on 1 January of each year ,
    beginning with 1 January 1977 *
2.  The specific component of the excise duty may not, be lower thar
    or higher than 50/o of the amount of the total tax burden resulting
    from the aggregation of the proportional excise duty,' the      specific
    excise duty and the VAT levied on these cigarettes ,
3.  If the excise duty or the VAT levied on the price class referred to
    above is amended after 1 January 1977 > the amount of the specific
    excise duty shall be established by reference to the new total tax
    burden on the cigarettes referred to in paragraph 1 .
4 . In derogation from Article 4 ( l )» each Ilembcr State nay exclude
    cust ons duties fron the basis of calculation of the proportional
    excise duty on cigarettes .
5.  The Member States may levy on cigarettes a minimum excise duty the
    amount of which inay not , however , be higher than $Ofo of, the aggregate
    amount of the proportional excise duty and -the specific excise duty
    which they levy on the cigarettes referred to in paragraph 1 ."
                                 Article 4
This Directive   is addressed to the Member States .
Done at Brussels ,                         for the Council ,.
                                            The President .