Explanatory Memorandum to COM(2010)641 - Structure and rates of excise duty applied to manufactured tobacco - Main contents
Please note
This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2010)641 - Structure and rates of excise duty applied to manufactured tobacco. |
|---|---|
| source | COM(2010)641  |
| date | 09-11-2010 |
2. In its opinion of 21 November 2007 the Consultative Working Party of the legal services set up under the Interinstitutional Agreement of 20 December 1994 on an accelerated working method for official codification of legislative texts i has stated that the proposal referred to in point 1 does indeed confine itself to straightforward codification, without any substantive changes to the acts covered by it.
3. Having regard to the amendment adopted i in respect of the proposal referred to in point 1 and in view of the work already carried out in the course of the legislative procedure, the Commission has decided to present – in accordance with Article 293 i of the TFEU – an amended proposal for codification of the Directives in question.
This amended proposal also takes account of the purely formal or editorial changes proposed by the Consultative Working Party of the legal services, where these changes are considered justified i.
4. The changes made in this amended proposal, compared with the proposal referred to in point 1, are the following:
The first citation is replaced by the following:
‘Having regard to the Treaty on the Functioning of the European Union, and in particular Article 113 thereof,’.
In the second citation, the word ‘ European ’ is inserted before ‘ Commission ’.
The following third citation is inserted:
‘ After transmission of the draft legislative act to the national Parliaments, ’.
A new final citation is added, reading as follows:
‘ Acting in accordance with a special legislative procedure, ’.
The following recital 2 is inserted:
‘ i The Union's fiscal legislation on tobacco products needs to ensure the proper functioning of the internal market and, at the same time, a high level of health protection, as required by Article 168 of the Treaty on the Functioning of the European Union, bearing in mind that tobacco products can cause serious harm to health and that the Union is Party to the World Health Organization's Framework Convention on Tobacco Control (FCTC). Account should be taken of the situation prevailing for each of the various types of manufactured tobacco. ’.
The former recital 2 is re-numbered recital 3 and is replaced by the following:
‘ i One of the objectives of the Treaty on the European Union is to maintain an economic union, whose characteristics are similar to those of a domestic market, within which there is healthy competition. As regards manufactured tobacco, achievement of this aim presupposes that the application in the Member States of taxes affecting the consumption of products in this sector does not distort conditions of competition and does not impede their free movement within the Union. ’.
The former recital 3 is re-numbered recital 9.
Recital 4 is replaced by the following:
‘ i The various types of manufactured tobacco, distinguished by their characteristics and by the way in which they are used, should be defined .’.
The former recital 5 is re-numbered recital 6, and the former recital 6 is re-numbered recital 5.
The former recital 8 is re-numbered recital 11.
The following recital 8 is inserted:
‘ i In the interests of uniform and fair taxation, a definition of cigarettes, cigars and cigarillos and of other smoking tobacco should be laid down so that, respectively, rolls of tobacco which according to their length can be considered as two cigarettes or more are treated as two cigarettes or more for excise purposes, a type of cigar which is similar in many respects to a cigarette is treated as a cigarette for excise purposes, smoking tobacco which is similar in many respects to fine-cut tobacco intended for the rolling of cigarettes is treated as fine-cut tobacco for excise purposes, and tobacco refuse is clearly defined. In view of the economic difficulties that immediate implementation could cause for the German and Hungarian operators concerned, Germany and Hungary should be authorised to postpone the application of the definition of cigars and cigarillos until 1 January 2015. ’.
The former recitals 9 and 10 are replaced by the following, which is re-numbered recital 17:
‘ (17) As regards products other than cigarettes, a harmonised incidence of tax should be established for all products belonging to the same group of manufactured tobacco. The setting of an overall minimum excise duty expressed as a percentage, as an amount per kilogram or for a given number of items is the most appropriate for the functioning of the internal market. ’.
The former recitals 11, 13 and 14 are deleted.
The former recital 12 is renumbered recital 20; the words ‘ The Portugese Republic ’ are replaced by the word ‘ Portugal ’ in that recital.
The following recitals 12 to 16, 18, 19, 21 and 22 are inserted:
‘ i Without prejudice to the mixed tax structure and the maximum percentage of the specific component of the total tax burden, 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.
For the proper functioning of the internal market, it is necessary to establish minimum excise duties for all categories of manufactured tobacco.
As regards a price related minimum requirement for cigarettes, neutral conditions of competition for manufacturers should be assured, the partitioning of the tobacco markets should be reduced and health objectives should be underscored. This requirement should thus refer to the weighted average retail selling price, whereas a monetary minimum should be applicable to all cigarettes. For the same reasons, the weighted average retail selling price should also serve as a reference for measuring the importance of specific excise duty within the total tax burden.
As regards prices and excise levels, in particular for cigarettes — by far the most important category of tobacco products — as well as for fine cut-tobacco intended for the rolling of cigarettes, there are still considerable differences between Member States which may disturb the operation of the internal market. A certain degree of convergence between the tax levels applied in the Member States would help reduce fraud and smuggling within the Union.
Such convergence would also help to ensure a high level of protection for human health. The level of taxation is a major factor in the price of tobacco products, which in turn influences consumers' smoking habits. Fraud and smuggling undermine tax induced price levels, in particular of cigarettes and fine-cut tobacco intended for the rolling of cigarettes, and thus jeopardise the achievement of tobacco control and health protection objectives.
As regards fine-cut tobacco intended for the rolling of cigarettes, a Union price related minimum requirement should be expressed in such a way as to obtain effects similar to those in the field of cigarettes and should take the weighted average retail selling price as the point of reference.
It is necessary to bring the minimum levels for fine-cut tobacco intended for the rolling of cigarettes closer to the minimum levels applicable to cigarettes, so as to better take account of the degree of competition existing between the two products, reflected in consumption patterns observed, as well as their equally harmful character.
Transitional periods should allow Member States to adapt smoothly to the levels of the overall excise duty, thus limiting possible side effects.
In order to prevent damage to Corsica's economic and social equilibrium it is both essential and justifiable to provide for a derogation, until 31 December 2015, by which France may apply a rate of excise duty that is lower than the national rate to cigarettes and other manufactured tobaccos released for consumption in Corsica. By that date the tax rules for manufactured tobaccos released for consumption there should be brought fully into line with the rules for mainland France. Nevertheless, too abrupt a change should be avoided and there should therefore be a stepwise increase in the excise duty currently levied on cigarettes and fine-cut tobacco intended for the rolling of cigarettes in Corsica. ’.
The former recital 15 is re-numbered recital 23.
The former recital 16 is re-numbered recital 24; the word ‘ introduced ’ is replaced by the words ‘ provided for ’ in that recital.
The former recital 17 is re-numbered recital 25.
In Article 2 i, the words ‘ Community provisions ’ are replaced by the words ‘ Union provisions ’.
In Article 3, paragraph 2 is replaced by the following:
‘2. A roll of tobacco referred to in paragraph 1 shall, for excise duty purposes, be considered as two cigarettes where, excluding filter or mouthpiece, it is longer than 8 cm but not longer than 11 cm, as three cigarettes where, excluding filter or mouthpiece, it is longer than 11 cm but not longer than 14 cm, and so on.’.
Article 4 is replaced by the following:
‘Article 4
1. For the purposes of this Directive the following shall be deemed to be cigars or cigarillos if they can be and, given their properties and normal consumer expectations, are exclusively intended to be smoked as they are:
(a) rolls of tobacco with an outer wrapper of natural tobacco;
(b) rolls of tobacco with a threshed blend filler and with an outer wrapper of the normal colour of a cigar, of reconstituted tobacco, covering the product in full, including, where appropriate, the filter but not, in the case of tipped cigars, the tip, where the unit weight, not including filter or mouthpiece, is not less than 2,3 g and not more than 10 g, and the circumference over at least one third of the length is not less than 34 mm.
2. By way of derogation from paragraph 1, Germany and Hungary may continue to apply until 31 December 2014 Article 3 of Directive 95/59/EC as amended by Directive 2002/10/EC.
3. Products which consist in part of substances other than tobacco but otherwise fulfil the criteria set out in paragraph 1 shall be treated as cigars and cigarillos .’.
In Article 5, point (b) of paragraph 1 is replaced by the following:
‘ (b) tobacco refuse put up for retail sale which does not fall under Articles 3 and 4 and which can be smoked. For the purpose of this Article, ‘ tobacco refuse ’ shall be deemed to be remnants of tobacco leaves and by-products obtained from tobacco processing or the manufacture of tobacco products. ’ .
In Article 5, paragraph 2 is replaced by the following:
‘ 2. Smoking tobacco in which more than 25 % by weight of the tobacco particles have a cut width of less than 1,5 millimetre shall be deemed to be fine-cut tobacco for the rolling of cigarettes.
Member States may also deem smoking tobacco in which more than 25 % by weight of the tobacco particles have a cut width of 1,5 millimetre or more and which was sold or intended to be sold for the rolling of cigarettes to be fine-cut tobacco for the rolling of cigarettes.’.
In Article 6, in the introductory words of Article 13, in point (a) of paragraph 1 of Article 14 and in the first subparagraph of Article 15 i, the word ‘ Community ’ is replaced by the word ‘ Union ’.
Article 7 is re-numbered Article 9. In point (c) of paragraph 2 of that Article, the words ‘ value-added tax (VAT) ’ are replaced by the word ‘ VAT ’.
Article 8 is re-numbered Article 7. The following changes are introduced in that Article:
(i) in the first subparagraph of paragraph 1, the word ‘ Community ’ is replaced by the word ‘ Union ’;
(ii) in the second subparagraph of paragraph 1, the words ‘ each Member State ’ are replaced by the words ‘ Member States ’;
(iii) paragraph 4 is replaced by the following:
‘4. Where necessary, the excise duty on cigarettes may include a minimum tax component, provided that the mixed structure of taxation and the band of the specific component of the excise duty as laid down in Article 8 is strictly respected.’.
Article 9 is re-numbered Article 10 and is replaced by the following:
‘ Article 10
1. The overall excise duty (specific duty and ad valorem duty excluding VAT) on cigarettes shall represent at least 57 % of the weighted average retail selling price of cigarettes released for consumption. That excise duty shall not be less than EUR 64 per 1 000 cigarettes irrespective of the weighted average retail selling price.
However, the 57 % requirement set out in the first subparagraph shall not apply to Member States which levy an excise duty of at least EUR 101 per 1 000 cigarettes on the basis of the weighted average retail selling price.
2. From 1 January 2014, the overall excise duty on cigarettes shall represent at least 60 % of the weighted average retail selling price of cigarettes released for consumption. That excise duty shall not be less than EUR 90 per 1 000 cigarettes irrespective of the weighted average retail selling price.
However, the 60 % requirement set out in the first subparagraph shall not apply to Member States which levy an excise duty of at least EUR 115 per 1 000 cigarettes on the basis of the weighted average retail selling price.
Bulgaria, Estonia, Greece, Latvia, Lithuania, Hungary, Poland and Romania shall be allowed a transitional period until 31 December 2017 in order to reach the requirements laid down in the first and second subparagraphs.
3. Member States shall gradually increase excise duties in order to reach the requirements referred to in paragraph 2 on the dates set therein. ’.
Article 10 is re-numbered Article 11 and is replaced by the following:
‘ Article 11
1. Where a change in the weighted average retail selling price of cigarettes occurs in a Member State, thereby bringing the overall excise duty below the levels specified in the first sentences of paragraphs 1 and 2 of Article 10 respectively, the Member State concerned may refrain from adjusting that duty until 1 January of the second year following that in which the change occurs.
2. Where a Member State increases the rate of VAT on cigarettes, it may reduce the overall excise duty up to an amount which, expressed as a percentage of the weighted average retail selling price, is equal to the increase in the rate of VAT, also expressed as a percentage of the weighted average retail selling price, even if such an adjustment has the effect of reducing the overall excise duty to below the levels, expressed as a percentage of the weighted average retail selling price, laid down in the first sentences of paragraphs 1 and 2 of Article 10 respectively.
However, the Member State shall raise that duty again so as to reach at least those levels by 1 January of the second year after that in which the reduction took place.’.
Article 11 is re-numbered Article 8 and is replaced by the following:
‘ Article 8
1. The percentage of the specific component of excise duty in the amount of the total tax burden on cigarettes shall be established by reference to the weighted average retail selling price.
2. The weighted average retail selling price shall be calculated by reference to the total value of all cigarettes released for consumption, based on the retail selling price including all taxes, divided by the total quantity of cigarettes released for consumption. It shall be determined by 1 March at the latest of each year on the basis of data relating to all such releases for consumption made in the preceding calendar year.
3. Until 31 December 2013, the specific component of the excise duty shall not be less than 5 % and shall not be more than 76,5 % of the amount of the total tax burden resulting from the aggregation of the following:
(a) specific excise duty;
(b) the proportional excise duty and the value added tax (VAT) levied on the weighted average retail selling price.
4. From 1 January 2014, the specific component of the excise duty on cigarettes shall not be less than 7,5 % and shall not be more than 76,5 % of the amount of the total tax burden resulting from the aggregation of the following:
(a) specific excise duty;
(b) the proportional excise duty and the VAT levied on the weighted average retail selling price.
5. By way of derogation from paragraphs 3 and 4, where a change in the weighted average retail selling price of cigarettes occurs in a Member State, thereby bringing the specific component of the excise duty, expressed as a percentage of the total tax burden, below the percentage of 5 % or 7,5 %, whichever is applicable, or above the percentage of 76,5 % of the total tax burden, the Member State concerned may refrain from adjusting the amount of the specific excise duty until 1 January of the second year following that in which the change occurs.
6. Subject to paragraphs 3, 4 and 5, Member States may levy a minimum excise duty on cigarettes .’.
Article 12 is replaced by the following:
‘ Article 12
1. Portugal may apply a reduced rate of up to 50 % less than that laid down in Article 10 to cigarettes consumed in the most remote regions of the Azores and Madeira, made by small-scale manufacturers each of whose annual production does not exceed 500 tonnes.
2. By way of derogation from Article 10, France may continue to apply for the period from 1 January 2010 to 31 December 2015 a reduced rate of excise duty to cigarettes released for consumption in the departments of Corsica up to an annual quota of 1 200 tonnes. The reduced rate shall be:
(a) until 31 December 2012, at least 44 % of the price for cigarettes in the price category most in demand in those departments ;
(b) from 1 January 2013, at least 50 % of the weighted average retail selling price of cigarettes released for consumption; the excise duty shall not be less than EUR 88 per 1 000 cigarettes irrespective of the weighted average retail selling price;
(c) from 1 January 2015, at least 57 % of the weighted average retail selling price of cigarettes released for consumption; the excise duty shall not be less than EUR 90 per 1 000 cigarettes irrespective of the weighted average retail selling price .’.
In Article 14, paragraph 2 is replaced by the following:
‘ 2. The overall excise duty expressed as a percentage, as an amount per kilogram or for a given number of items shall be at least equivalent to the rates or minimum amounts laid down for:
(a) cigars or cigarillos: 5 % of the retail selling price inclusive of all taxes or EUR 12 per 1 000 items or per kilogram;
(b) fine-cut smoking tobacco intended for the rolling of cigarettes: 40 % of the weighted average retail selling price of fine-cut smoking tobacco intended for the rolling of cigarettes released for consumption, or EUR 40 per kilogram;
(c) other smoking tobaccos: 20 % of the retail selling price inclusive of all taxes, or EUR 22 per kilogram.
From 1 January 2013, the overall excise duty (specific duty and/or ad valorem duty excluding VAT) on fine-cut smoking tobacco intended for the rolling of cigarettes shall represent at least 43 % of the weighted average retail selling price of fine-cut smoking tobacco intended for the rolling of cigarettes released for consumption, or at least EUR 47 per kilogram.
From 1 January 2015 the overall excise duty (specific duty and/or ad valorem duty excluding VAT) on fine-cut smoking tobacco intended for the rolling of cigarettes shall represent at least 46 % of the weighted average retail selling price of fine-cut smoking tobacco intended for the rolling of cigarettes released for consumption, or at least EUR 54 per kilogram.
From 1 January 2018, the overall excise duty (specific duty and/or ad valorem duty excluding VAT) on fine-cut smoking tobacco intended for the rolling of cigarettes shall represent at least 48 % of the weighted average retail selling price of fine-cut smoking tobacco intended for the rolling of cigarettes released for consumption, or at least EUR 60 per kilogram.
From 1 January 2020, the overall excise duty (specific duty and/or ad valorem duty excluding VAT) on fine-cut smoking tobacco intended for the rolling of cigarettes shall represent at least 50 % of the weighted average retail selling price of fine-cut smoking tobacco intended for the rolling of cigarettes released for consumption, or at least EUR 60 per kilogram.
The weighted average retail selling price shall be calculated by reference to the total value of fine-cut smoking tobacco intended for the rolling of cigarettes released for consumption, based on retail selling price including all taxes, divided by the total quantity of fine-cut smoking tobacco intended for the rolling of cigarettes released for consumption. It shall be determined by 1 March at the latest of each year on the basis of data relating to all such releases for consumption made in the preceding calendar year .’.
In Article 14, paragraph 4 is replaced by the following:
‘ 4. By way of derogation from paragraphs 1 and 2, France may continue to apply, for the period from 1 January 2010 to 31 December 2015, a reduced rate of excise duty to manufactured tobacco other than cigarettes released for consumption in the departments of Corsica. The reduced rate shall be:
(a) for cigars and cigarillos:
at least 10 % of the retail selling price, inclusive of all taxes;
(b) for fine-cut smoking tobacco intended for the rolling of cigarettes:
(i) until 31 December 2012, at least 27 % of the retail selling price, inclusive of all taxes;
(ii) from 1 January 2013, at least 30 % of the retail selling price, inclusive of all taxes;
(iii) from 1 January 2015, at least 35 % of the retail selling price, inclusive of all taxes;
(c) for other smoking tobacco:
at least 22 % of the retail selling price, inclusive of all taxes.’.
The title of Chapter 5 is replaced by the following:
‘ Determination of the maximum retail selling price of manufactured tobacco, collection of excise duty, exemptions and refunds ’.
In the second subparagraph of Article 15 i, the words ‘ Community legislation ’ are replaced by the words ‘ Union legislation ’.
In the first subparagraph of Article 15 i, the words ‘ Community products ’ are replaced by the words ‘ products originating in the Union ’.
In Article 16, paragraph 2 is replaced by the following:
‘ 2. Importers and manufacturers of manufactured tobacco established in the Union shall be subject to the system set out in paragraph 1 as regards the detailed rules for levying and paying the excise duty .’.
In Article 18, paragraph 1 is replaced by the following:
‘ 1. The Commission shall publish once a year the value of the euro in national currencies to be applied to the amounts of the overall excise duty.
The exchange rates to be applied shall be those obtained on the first working day of October and published in the Official Journal of the European Union and shall apply from 1 January of the following calendar year.’.
Article 18 i is deleted.
Article 18 i is re-numbered 18 i and is replaced by the following:
‘ 2. Member States may maintain the amounts of the excise duties in force at the time of the annual adjustment provided for in paragraph 1 if the conversion of the amounts of the excise duties expressed in EUR would result in an increase of less than 5 % or less than EUR 5, whichever is the lower amount, in the excise duty expressed in national currency .’.
Article 19 is replaced by the following:
‘ Article 19
1. Every four years, the Commission shall submit to the Council a report and, where appropriate, a proposal concerning the rates and the structure of excise duty laid down in this Directive.
The report by the Commission shall take into account the proper functioning of the internal market, the real value of the rates of excise duty and the wider objectives of the Treaty.
2. The report referred to in paragraph 1 shall be based in particular on the information provided by the Member States.
3. The Commission shall, in accordance with the procedure referred to in Article 43 of Council Directive 2008/118/EC, determine a list of statistical data needed for the report, excluding data relating to individual natural persons or legal entities. Apart from data readily available to Member States, the list shall only contain data the collection and assembly of which does not involve a disproportionate administrative burden on the part of the Member States.
4. The Commission shall not publish or otherwise divulge data where it would lead to the disclosure of a commercial, industrial or professional secret .’.
Article 20 is deleted.
Article 21 is re-numbered Article 20.
Article 22 is re-numbered Article 21. In the first paragraph of that article, the word ‘ acts ’ is replaced by the word ‘ Directives ’.
Article 23 is re-numbered Article 22, and is replaced by the following:
‘ This Directive shall enter into force on 1 January 2011 .’.
Article 24 is re-numbered Article 23.
In Annex I:
(a) Part A is replaced by the following:
‘ Part A
Contents
Council Directive 92/79/EEC (OJ L 316, 31.10.1992, p.
8)
Council Directive 2002/10/EC (OJ L 46, 16.2.2002, p. 26) only Article
Council Directive 2003/117/EC (OJ L 333, 20.12.2003, p. 49) only Article
Council Directive 2010/12/EU (OJ L 50, 27.2.2010, p.
1) only Article
Council Directive 1999/81/EC (OJ L 211, 11.8.1999, p. 47) only Article
Council Directive 2002/10/EC (OJ L 46, 16.2.2002, p. 26) only Article
Council Directive 2003/117/EC (OJ L 333, 20.12.2003, p. 49) only Article
Council Directive 2010/12/EU (OJ L 50, 27.2.2010, p.
1) only Article
Council Directive 1999/81/EC (OJ L 211, 11.8.1999, p. 47) only Article
Council Directive 2002/10/EC (OJ L 46, 16.2.2002, p. 26) only Article
Council Directive 2010/12/EU (OJ L 50, 27.2.2010, p.
1) only Article 3’
(b) in Part B, the following line is added:
‘2010/12/EU’ / ‘31 December 2010’ / ‘1 January 2011’
5. The Correlation Table, in Annex II, has been amended in accordance with the foregoing.
6. To facilitate reading and examination, the full text of the amended proposal for codification is attached hereto.
ê 92/79/EEC, 92/80/EEC, 95/59/EC (adapted)