In 2019, The European House-Ambrosetti has decided to launch the Think Tank Platform Initiative to contribute to the current debate on the revision of the fiscal treatment of tobacco products and focus on novel tobacco products (such as e-cigarettes and Heated Tobacco products).
State of the art on manufactured tobacco
Manufactured tobacco products are among the excisable goods for which a harmonized regulation across the European Union exists. The fiscal treatment of manufactured tobacco products is defined by Directive 2011/64/EU, also known as Tobacco Excise Directive (TED), which defines:
- the categories of manufactured tobacco products (cigarettes and “other tobacco products”)
- the principles of taxation
- the minimum rates and structures to be applied.
The Directive itself requires to evaluate the need for a revision of the rates and structure of the excise duties every four years, in order to make sure that the existing provisions are still aligned with the overall goal of ensuring a proper functioning of the internal market while protecting consumers’ health. After a positive evaluation - achieved in 2015 - another revision has been issued.
The European Commission has concluded that:
- while the current rules work well in terms of predictability and stability for Member State fiscal revenue, they are no longer as effective in deterring consumption
- the emergence of new products, such as e-cigarettes, heated tobacco products and new addictive products reveal the limits of the current legal framework
- a more comprehensive approach, taking on board all aspects of tobacco control including public health, taxation, the fight against illicit trade and environmental concerns, is needed.
The initiative was structured with the aim of elaborating a number of authoritative studies on innovative fiscal schemes which could be applied to novel tobacco products and the consequent revision of the existing fiscal schemes currently applied to them.
The European House-Ambrosetti has an established track record working with the tobacco industry, and this helped us to gain awareness of the disruptive effects of novel tobacco products for the sector itself but also for the regulators. Those products have completely new features (in terms of underlying production processes, technological content just to quote a few) so the regulatory approach needs to consider this novelty.
To create new knowledge, we decided to involve four European Think Tanks with a deep expertise in fiscal related themes (whether or not already applied to the tobacco industry) and direct knowledge of countries that represent an interesting case as far as the adoption of novel tobacco products is concerned.
We also asked and won the support, as industrial partner of the initiative, of Philip Morris International, which allowed us to gain a deep understanding of the industry dynamics both with a historical perspective and with a forward-looking one and to have access to detailed market data for HTP.
In this setting, each of the involved Think Tanks developed a paper on a specific aspect of the fiscal treatment of novel tobacco products, which were evaluated by a panel of experts with a deep understanding of the policy making process .
|FAES investigated whether the TED has achieved its goal of efficiency and harmonization and if the current structure is ready to solve the issues related to the commercialization of novel tobacco products (which are perceived differently than traditional products by consumers).||IME looked at the different market shares gained by HTP in the EU countries and tried to explain these differences looking at several factors, including the excise framework.|
|IPP addressed the question of how much novel tobacco products are substitute products of traditional cigarettes since the relation between the two product’s categories is extremely relevant in the policy design.||LFMI looked at the affordability of tobacco products in EU countries, analyzing the role of taxation in determining affordability and therefore exploring the link between taxation and illicit trade.|