Plain packaging is not the panacea sought by policy makers
Since 2016, the European Commission has been working on a revision of the Tobacco Excise Directive, the “TED”, the legal framework ensuring that excise duties are applied in the same way, and to the same products, in the whole single market, writes Donato Raponi, honorary professor of European tax law, former head of excise unit, consultant in tax law.
Member States, through the Council of the EU, recently requested that a range of new products be included in TED. It includes electronic cigarettes which do not contain tobacco but contain nicotine. However, there are also nicotine-free electronic cigarettes and their fate is unclear.
But why a directive which, until now, was intended only the tobacco be extended to include products that contain or the tobacco or nicotine? Isn’t that a step too far?
The constitution of the EU, enshrined in the treaties of the European Union, is very clear that before proposing any legislative initiative, some key issues need to be addressed.
EU rules1 explain very clearly that the products should only be included in the TED to ensure the proper functioning of the internal market and to avoid distortions of competition.
It is by no means clear that a harmonized treatment of excise duties on nicotine-free products, such as nicotine-free e-liquids, across Europe will help to mitigate these distortions.
There is very little evidence on the extent to which consumers view nicotine-free e-liquids as a viable substitute for nicotine-containing e-liquids. The European Commission recently published Eurobarometer study on the attitudes of Europeans towards tobacco and electronic cigarettes has nothing to say on this question. And the evidence from available market research experts is limited at best.
It is, therefore, virtually impossible to know how many consumers – if any – would switch to nicotine-free e-liquids if only nicotine-containing e-liquids were subject to excise duty at EU level.
What we do know, however, is that almost everyone who uses tobacco products already covered by TED does not view nicotine-free e-cigarettes as viable substitutes for them. And that’s why most cigarette smokers who switch to alternative products look for other products. container nicotine.
There may be parallels between this and the excise treatment of non-alcoholic beer, the latter not being covered by the EU Alcohol Directive. Although it is intended as an alternative product, this does not mean that non-alcoholic beer is considered a strong product. replace by most people who drink alcoholic beer. Member States have not applied a harmonized excise duty on non-alcoholic beer and, so far, the efficient functioning of the single market has not been compromised.
Even if the absence of harmonized excise duty on nicotine-free electronic cigarettes were to distort competition, it must be significant enough to justify any intervention at EU level. The case law of the CJEU confirms to what extent the distortions of competition must be “sensitive” to justify any modification of European legislation.
Simply put, if there is only a limited impact, EU intervention is not justified.
The market for nicotine-free electronic cigarettes is currently very small. Euromonitor data shows that nicotine-free e-liquids for open systems accounted for only 0.15% of all sales of tobacco and nicotine products in the EU in 2019. The Eurobarometer reveals that while almost half of European consumers of electronic cigarettes use electronic cigarettes with nicotine 10% of them use e-cigarettes without nicotine on a daily basis.
In the absence of clear evidence of material competition between nicotine-free electronic cigarettes and products already covered by the TED, as well as low sales of nicotine-free products, the criterion of the existence of a distortion of competition ” sensible ”is not: at least for the moment – obviously in the process of being met.
Even though there is no argument in favor of new legislative measures at EU level for nicotine-free electronic cigarettes, this does not prevent Member States from levying a national excise on these products. This has already been the practice in Member States so far.
Germany, for example, does not need a European directive to collect its national excise duties on coffee, while France, Hungary, Ireland and Portugal levy a tax on sugary drinks. without any European directive on excise duties on sodas being in place.
The case of e-liquids without nicotine is no different.
Nothing prevents a Member State from taxing nicotine-free e-liquids at its own pace without unnecessary EU intervention.
1 Article 113 of the Treaty on the Functioning of the European Union