01 July 2022

Think Tank Platform Initiative: fiscal treatment of tobacco and nicotine products

In 2019, The European House-Ambrosetti decided to launch the Think Tank Platform Initiative to contribute to the current European debate on the revision of the fiscal treatment of tobacco and nicotine products. The purpose of this initiative was to complement the studies and assessments already ongoing and analyse in details key aspects and impacts of different tax regimes. Therefore, we selected few specific aspects to assess in depth and decided to primarily focus on novel tobacco products (namely, e-cigarettes and Heated Tobacco Products).

The objective was to create a number of authoritative studies on innovative fiscal schemes, which can be applied to novel tobacco products and contribute to the revision of the existing fiscal schemes currently applied to such products.

To broaden our perspective, we also involved four European Think Tanks with a deep expertise in fiscal related themes and direct knowledge of countries that represent an interesting case, as far as the adoption of novel tobacco products is concerned.

The involved Think Tanks are:

  • Fundación para el Análisis y los Estudios Sociales (FAES) – Spain
  • Institute of Market Economics (IME) – Bulgaria
  • Institute of Public Policy (IPP) – Portugal
  • Lithuanian Free Market Institute (LFMI) – Lithuania

As a whole, the four position papers allow us to identify some high-level messages that we believe could be useful for policy implementation:

  • novel tobacco products are substantially different from traditional combusted tobacco products. They should be treated in a way able to recognize that difference. They have specific market dynamics (e.g. factors affecting consumers’ choices), different users’ profiles, much higher technological content e more complex production and distribution processes. This diversity can support the creation of a specific fiscal framework for novel tobacco products
  • the protection of consumers’ health can be achieved while ensuring stability in fiscal revenues through a rebalancing of fiscal burdens: combustible products can provide a higher share of revenues (e.g. by closing the existing gap between fine cut tobacco and cigarettes) while novel tobacco products (e-cigarettes, HTP, nicotine pouches) can benefit from a tax differential, as it is already happening in the majority of Member States
  • the implementation of such policy could lead to a faster reduction in smoking prevalence, since consumers will have an additional incentive to try and use novel tobacco products. At the same time, the new products, if maintained affordable by a favorable reduced taxation could as well contribute to reduce the demand for illicit combustible tobacco products, creating a safety net for state’s fiscal revenues.

These results were discussed during a Round Table that was held in Brussels on June 21, 2022, participated by industry representatives, experts from academia and attaches from Permanent Representations of EU member states.

For further information and to download the papers:

Visit the Think Tank Platform Initiative's webpage