On the proposal for a Council directive amending Directive (EU) 2020/262 as regards the general arrangements for excise duty in respect of tobacco and tobacco related products

The Tobacco Taxation Directive (TTD) recast aims to update the rules on tobacco taxation both in terms of minimum excise duty rates as well as by including novel tobacco related products that have emerged since the last TTD review. Given the dual objective of ensuring both the proper functioning of the internal market and a high level of health protection, it is necessary to find an ambitious but also feasible and realistic equilibrium. The Rapporteur of course understands the need for a review of the tobacco taxation rules in the EU - the minimum rates are becoming outdated due to wage increases and inflation, new products have entered the market and a certain level of harmonization across EU Member States is desirable. Moreover, tobacco taxation can have an impact on public health.

However, it is essential to strike the right balance. Raising the minimum rates of taxation must be done in a careful and thought-out way, taking into account all possible effects on consumers, national tax authorities and the tobacco products market. The effectiveness of excise duties depends not only on the level of minimum rates, but also on the pace, structure and predictability of their implementation. Excessively abrupt or rigid adjustments may distort legal markets and increase incentives for illicit trade, thereby undermining both revenue collection and enforcement objectives. That is why the Rapporteur proposes a more gradual and pragmatic increase of the minimum rates.

A central consideration of the Report is the differentiated treatment of products based on their characteristics, health risks and patterns of use. The Commission proposal recognises the diversity of tobacco and nicotine products and introduces specific tax structures for individual categories. The Rapporteur supports this differentiated approach and considers it essential to always consider the specificities of different tobacco products.

The Report also addresses the balance between public health objectives and fiscal structure. Evidence suggests that some noncombustible products may present lower risks than traditional cigarettes and may contribute to reduced consumption of the most harmful products. The Rapporteur therefore believes that excise duty policy should avoid a one-size-fits-all approach and should reflect relative risk profiles in a proportionate manner.

The Commission introduced two new mechanisms in the TTD - the indexation of minimum rates that takes place every three years and the price level index. The Rapporteur considers both tools to be useful for future-proofing the TTD. The Report adapted the indexation tool by limiting it to core inflation and by introducing a cap of a maximum adjustment by 12 % for better predictability. The price level index ensures a fairer determination of the minimum rates based on how high the general price level is in a given Member State. The Rapporteur agrees with this logic and decided that the price level index’s weight in the calculation of the final minimum rate should be increased from one third to one half.

Finally, the Report highlights the role of transitional periods in facilitating the smooth implementation of the new legal framework. Transitional regimes allow Member States and market participants to adapt progressively to increased minimum rates, thereby reducing the risk of market disruption and higher illicit trade. Therefore, the Rapporteur decided to prolong the transitional period by one year until the end of 2032.

On this basis, the Report proposes targeted adjustments aimed at strengthening the proportionality, coherence and practical effectiveness of the Commission proposal, while fully respecting its core objectives.

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