Cigarette prices set to rise under new EU plans

The duty on cigarettes should increase in order to help cut the death toll from tobacco, according to new European commission proposals.

Plans outlined by the executive on Wednesday would put all EU states on an equal footing and almost certainly mean a price hike for cigarettes in most countries.

EU customs commissioner László Kovács said, “Today’s proposal supports the EU policy to reduce tobacco consumption.

“It will also help reduce illicit trade and cross-border shopping, which undermine revenue and health objectives.”

He said the proposal recommends a number of important amendments to existing EU legislation in order to “modernise and simplify” existing rules, make them more transparent and better integrate public health concerns.

Consumption of cigarettes in the EU27 fell 10 percent between 2002 and 2006, while excise duties rose by an average 33 percent.

“In order to trigger a similar decline in consumption over the coming five years, further increases in excise duties would be desirable,” said the Hungarian official.

Currently, excise duties levied on cigarettes must account for at least 57 per cent of their price and be at least €64 per 1000 cigarettes.

Under the commission proposals, the current percentage would rise to 63 per cent and the rate increase to €90 for all cigarettes by 2014.

Speaking at a news conference, Kovács said some member states, mostly EU newcomers like Poland and Hungary, will be given up to 2016 to implement the draft directive to reflect their different circumstances.

At present, there are considerable differences in taxation levels between the lowest and the highest-taxing member states.

Kovács said a 25 per cent hike in cigarette prices would be needed to achieve a 10 per cent cut in demand.

The proposal is part of the executive's regular four-yearly update on the EU’s tobacco excise duties. Unanimity among the EU’s member states is needed to adopt tax proposals but Kovács said that, providing parliament backs the proposals, the new law will come into effect by the end of 2009.

The commission also wants higher duties on roll-your-own tobacco to bring them into line with tax on cigarettes.

The taxation chief said that, overall, the aim is to wean people off tobacco, adding, “According to the World Bank, price increases in tobacco products are the most effective single intervention in preventing smoking.”

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