Europe has shied away from regulating electronic cigarettes (‘e cigarettes’) as medical devices.

Tobacco control researchers have been furiously debating the safety and desirability of these products, which have surged in popularity over the past year (see ‘Regulation stacks up for e cigarettes’).

The European Commission had proposed to regulate e cigarettes as medical devices, as part of a major revision of tobacco control in the European Union (EU). But after negotiations this week, it seems that the nicotine inhaling devices will instead fall under the same rules as other tobacco products.

Some scientists believe that e cigarettes are less harmful than conventional cigarettes, and thus can help reduce the burden of disease from tobacco smoking. But others counter that with few controls on advertising and sales, the devices will make smoking socially acceptable again and that they can provide a gateway to conventional cigarettes for young people.

Politicians in the European Parliament have been pushing to have e cigarettes regulated as medical devices and therefore subject to tougher controls only when their marketing makes health claims (see ‘Europe on collision course over e cigarette legislation’). And they seem to have won over the other arms of the EU the Council of Ministers and the Commission although formal sign off on the deal is still required before it comes into force in 2014.

Tonio Borg, the EU health commissioner, said today that the agreement reached yesterday will put in place clear safety and quality standards for this growing sector of the market .

The deal will also mean all cigarette and tobacco products will have to have health warnings covering 65% of their packaging. Flavoured tobacco including menthol cigarettes will be banned.

Excise duty on manufactured tobacco

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SUMMARY

This directive establishes general principles for the harmonisation of the structure and rates of the excise duty which European Union (EU) countries apply to manufactured tobacco.

For the purposes of this directive, the term manufactured tobacco includes the following

• cigarettes
• cigars and cigarillos
• smoking tobacco, including fine cut tobacco for the rolling of cigarettes and other smoking tobacco.

Provisions applicable to cigarettes

Both cigarettes manufactured within the EU and those imported from non EU countries are subject to an ad valorem excise duty calculated on the maximum retail selling price, including customs duties, and also to a specific excise duty calculated per unit of the product. EU countries may, however exclude customs duties from the calculation of ad valorem excise duty on cigarettes.

The rate of the ad valorem excise duty and the amount of the specific excise duty must be identical for all cigarettes.

The percentage of the specific component of excise duty in the amount of the total tax burden on cigarettes is established in accordance with the weighted average retail selling price. The weighted average retail selling price is calculated in accordance with 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. The weighted average retail selling price must be determined by 1 March of each year based on the data for the previous year s releases for consumption.

The specific component of the excise duty must not be less than 5 % and not more than 76.5 % of the amount of the total tax burden resulting from the sum of the specific excise duty and the ad valorem excise duty and the value added tax (VAT) imposed on the weighted average retail selling price. From 1 January 2014, the specific component must be between 7.5 % and 76.5 %. Where there is a change in the weighted average retail selling price of cigarettes in an EU country that takes the specific component of the excise duty below 5 % or 7.5 %, whichever is applicable, or above 76.5 % of the total tax burden, the EU country 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.

EU countries may impose a minimum excise duty on cigarettes.

EU countries must apply minimum consumption taxes to cigarettes. This tax includes a specific excise duty per unit of the product, an ad valorem excise duty based on the maximum retail selling price, and a VAT proportional to the retail selling price.

The overall excise duty on cigarettes is the specific duty and ad valorem duty excluding VAT, and shall constitute at least 57 % of the weighted average retail selling price of cigarettes released for consumption. This excise duty must not be less than EUR 64 per 1 000 cigarettes irrespective of the weighted average retail selling price. EU countries which impose an excise duty of at least EUR 101 per 1000 cigarettes are not required to comply with the 57 % condition.

When an EU country increases the rate of VAT on cigarettes, it may reduce the overall excise duty to an amount equal to the increase in the rate of VAT when expressed as a percentage of the weighted average retail selling price.

Provisions applicable to manufactured tobacco other than cigarettes

EU countries shall apply an excise duty to manufactured tobacco other than cigarettes, which may be

• an ad valorem duty calculated on the basis of the maximum retail selling price of each product
• a specific duty expressed as an amount per kilogram or per 1000 pieces
• a mixture of an ad valorem element and a specific element.

The overall excise duty must be at least equivalent to the rates or minimum amounts established for

• cigars or cigarillos 5 % of the retail selling price inclusive of all taxes or EUR 12 per 1000 items or per kilogram
• fine cut smoking tobacco intended for the rolling of cigarettes 40 % of the weighted average retail selling price or EUR 40 per kilogram
• other smoking tobaccos 20 % of the retail selling price inclusive of all taxes, or EUR 22 per kilogram.

Maximum retail selling price

Manufacturers, their representatives or authorised agents in the EU, and importers of tobacco from non EU countries have the right to determine the maximum retail selling price for each of their products for each EU country in which the products concerned are to be released for consumption. This does not however affect the implementation of national legislation regarding price control or the observance of imposed prices, provided that they are compatible with EU legislation.

This directive repealed directives 92/79/EEC, 92/80/EEC and 95/59/EC.