The EU will propose to levy the first EU wide electronic cigarette tax

The EU will propose to levy the first EU wide electronic cigarette tax

A draft document of the European Commission indicates that the European Union (EU) will propose to levy an electronic cigarette tax as part of the tobacco tax amendment, which will also double the consumption tax of member countries with lower cigarette taxes.

So far, the tax situation of the EU has been decentralized, because different member states impose different tax rates on different products.

Although electronic cigarette products are regulated by the Tobacco Product Directive (TPD) in terms of health, there is still no EU wide tax framework applicable to them. In 2017, the European Commission (EC) requested consultations on proposed amendments to the Tobacco Consumption Tax Directive (TED), which would include such taxes.

In February 2020, a report of the European Commission showed that from the perspective of the internal market, this disunity is a worrying problem.

"On the market side, new electronic cigarettes, heated tobacco products and a new generation of modern products (containing  or cannabis) are entering the market and developing at an accelerated pace," it wrote. "The current lack of coordination in the tax regulatory framework for these products also limits the possibility of monitoring their market development and controlling their flows."

To this end, the proposed tax amendment will increase the EU's minimum consumption tax on cigarettes from € 1.80 per pack of 20 euros to € 3.60, thereby increasing the prices of Eastern European countries, which sell cigarettes for less than € 3 per pack.

For example, Hungary has been gradually increasing the local tobacco tax, making most local people unable to afford these products. This happened because the European Commission (EC) took it to the European Court of Justice (CJEU) in 2019 because it failed to levy the minimum consumption tax on cigarettes.

In addition, the updated version of the EU's 2011 Tobacco Tax Directive will tax innovative products such as electronic cigarettes and heated tobacco.

A key feature of the tax is that electronic cigarettes with higher power will be taxed at least 40%, while electronic cigarettes with lower power will face 20%. Heated tobacco products will also be subject to a fee of 55%, or a tax rate of 91 euros for every 1000 items sold.