Europa — press releases — press release — excise duties/cigarettes: the european

commission alerts member states on minimum retail selling
prices
commission alerts member states on minimum retail selling
prices

The European Commission is taking action against Member States that impose minimum retail selling prices on cigarettes. The Commission, in line with the jurisprudence of the European Court of Justice, takes the view that such minimum prices infringe Community law, distort competition and just benefit manufacturers by safeguarding their profit margins. The relevant Council Directive (95/59/EC) on taxes contains the right of the manufacturer and/or importer of tobacco products to determine the retail selling price. Minimum State prices impair this right and are therefore not compatible with the Directive. To achieve the objective of reducing tobacco consumption, the Commission advocates an increase of the excise duties on cheap cigarettes.

I strongly support Member States in their efforts to implement new health policy. However, this must respect Community law.» said Taxation Commissioner L szl&#243 Kov cs. «Introducing minimum retail prices for cigarettes is against Community law and mainly benefits manufacturers who are able to protect their profit margins .

Health protection objectives may be adequately attained by increasing excise duties

Recently, some Member States have introduced in their legislation minimum retail prices for cigarettes on the grounds of health protection. The European Commission has already launched and will continue launching infringement proceedings against Member States introducing this measure.

The Commission recognizes that price and tax measures are effective means for reducing tobacco consumption. However, tax and price measures must be in line with other Treaty obligations.

In this respect, the European Court of Justice has already stated that

  • imposing a minimum price is incompatible with the current legal framework (Directive 95/59/EC), since the setting of a minimum price by public authorities inevitably has the effect of limiting the freedom of producers and importers to determine their selling price (see also case C 302/00, Commission/France)
  • minimum prices are not necessary, since the health objectives may be attained by increased taxation of tobacco products. (Case C 216/98, Commission/Greece).

The Commission fully supports Member States in designing measures on tobacco control in order to ensure a high level of public health protection. Among the measures that could be used, the European Commission advocates an increase of excise duties and minimum taxes to tackle cigarettes consumption. This would have the same impact on the prices and would not hamper price competition to the sole benefit of manufacturers.

Background

Cigarettes are taxed by means of a specific and an ad valorem excise duty. Specific excise duties are taxes on the quantities of cigarettes. Ad valorem excises are a percentage applied to the price of the cigarettes. Consequently, for cheap cigarettes, the ad valorem excise duty will be small.

In order to increase the price of cheap cigarettes, Member States can either increase the specific excise duties and/or the minimum ad valorem excise duties. Minimum excise duties (calculated on the quantity) are independent of the price of the cigarettes and also ensure that all cigarettes, whether cheap or premium brands, are properly taxed.

The Council, acting on the basis of a report from the Commission, must re examine the rates and structures of excise duties on tobacco products before the end of 2006. In the context of this review, the Commission will examine whether and to what extent the current EU directives can be improved with a view to health protection whilst also respecting the principle of «proportionality».

Further information on current legislation on tobacco products is available on the following website

Illicit cigarettes flood into eu from the east — emerging europe real time — wsj

Dow Jones Newswires A pack of Jin Ling cigarettes.

Millions of illegally imported cigarettes, many made specifically for smuggling in the Russian enclave of Kaliningrad, are distributed within the EU every year after passing Poland’s northeastern borders. The point of entry isn’t accidental Kaliningrad is surrounded by the European Union’s passport free Schengen zone.

Cigarette smugglers try their luck on border crossings with Russia and Belarus, and the open border with Lithuania, where customs officers use increasingly sophisticated X ray machines and sniffing dogs to stop them.

«The majority of those crossing the Polish Russian border are smugglers,» says the regional customs office based in Olsztyn, in northern Poland. The region borders with the region of Kaliningrad, where Baltic Tobacco Factory produces Jin Ling, a brand not available through legal channels in the EU. The company hasn’t returned calls for comment.

Its cigarettes cost $3.20 for a carton of 10 packs in Russia. On the Polish side, they cost almost $2 per pack and around 3 pounds in Britain, Polish authorities say. Varying tax rates are a major factor behind the price differences.

According to British American Tobacco estimates, 20% 25% of smokers in England smoke illegally imported cigarettes, with the proportion rising to 50% 70% in poorer regions there.

An attempt to smuggle certain amounts above limits is a minor infraction under Polish law, punished with fines. Three years ago, a smuggler attempted to bring in 7,000 packs. He was given a fine of 10,000, which he paid in cash, Polish customs officials said. No surprise there, even including the fine, the smuggler would have made a profit of thousands of dollars had he been able to sell the ware in Poland. No small sum for someone living in a country where the average net salary is just over $1,000 a month.

More than three years after Poland and Lithuania joined the European Union’s passport free Schengen area, cigarettes smuggled through the EU’s external borders with the Baltic States pour into the rest of the EU through the open border between Poland and Lithuania. Customs in the region of Podlasie, which borders Lithuania and Belarus, last year seized about 110 million cigarettes, about 60% on the freeway border with Lithuania where customs officials stop selected trucks for inspection.

Smugglers, trying to avoid customs officers who stand at the roadside of the former border checkpoint, use roads through the forests, which reopened as barbed wire was removed when Poland and Lithuania joined the Schengen zone.

Smugglers also use the border with Belarus, where not every truck is X rayed. Last year, authorities seized a truck full of cigarettes, declared as wooden boards. The smugglers used 12 tons of steel sheets to make the vehicle’s weight correspond with the weight of the declared payload, said Maciej Czarnecki, spokesman for the customs office in the Podlasie region.

See a video report here.


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