Brussels, 10 April 2006
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 László Kovács. "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:
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.
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: