May 19. 2024. 1:42

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France tests EU single market with its own tobacco taxation

More than two years ago, France became the first EU country to impose higher (€6.61) than the EU average (€3.34) excise taxes on tobacco, in an effort to reduce smoking rates.

While the increased taxation indeed led to significantly lower smoking rates, illicit tobacco trade and cross-border shopping increased.

According to a tobacco industry-funded report, in 2021, illicit trade in France represented 29% of the total consumption (15.1 billion cigarettes).

The EU, the World Bank, and the World Health Organisation (WHO) have been advocating for higher taxes to decrease smoking rates.

France did not coordinate

In most EU countries, higher taxation has been effective as smoking rates have decreased, according to the latest Eurobarometer.

But in some countries, such as France, higher taxation also resulted in an increase in cross-border shopping.

To counter that, the WHO has urged governments to coordinate taxation with neighbouring countries and curb shopping in other countries.

Still, an EU diplomat told EURACTIV that “the French government did not coordinate with neighbouring countries before they introduced higher taxes”.

The European Commission is currently examining the possibility to increase further tobacco excise tax, with rumours in Brussels suggesting that Paris may be behind this push.

“France did wrong back then and ever since it wants other EU partners to make the same mistake because the government cannot take a step back and admit its failure”, an industry source familiar with the matter told EURACTIV.

The industry source referred to a statement made by French lawmaker Olivier Dussopt – now the labour minister in the new French government – in July 2020 in the national assembly, as he backed the excise tax measure.

“We are aware of the very offensive nature of our proposal in relation to the European position, but we see it as a means of bringing to life the debate on the harmonisation of taxation,” Dussopt said at the time.

“If a country like ours, where border flows feed significant traffic, does not adopt an offensive position regarding the quantities of tobacco authorised by the directive, the harmonisation debate will not move forward,” he added.

Dussopt insisted that the proposal’s essential objective is to help public health, support [local] tobacconists, and contribute to improving public revenue.

But the cross-border shopping caused the French government headaches as citizens travelled to neighbouring countries such as Germany and Luxembourg to buy cigarettes.

To address this phenomenon, the government then imposed restrictions and decided to allow only one carton of cigarettes (200 cigarettes) per person to be brought in from other countries.

The current EU guideline stipulates that up to 800 cigarettes can be transported when travelling between EU countries and member states cannot impose a threshold lower than that.

In July 2020, former Dutch MEP Derk Jan Eppink submitted a question to the European Commission, asking whether the executive was planning to take measures against France’s move, which violates the EU single market law.

The Commission replied in August 2020:

“This legislation, which has just been adopted, is currently being examined. Following this examination, the Commission will decide on the measures to be taken, in particular on the need to initiate an infringement procedure on the basis of Article 258 of the Treaty on the Functioning of the European Union.”

However, it seems that no action has been taken since, though an EU source told EURACTIV that the Commission had examined the French provisions and made contact with the authorities in Paris.

“Exchanges with that member state are still ongoing,” the source added. asked the French economy ministry whether a coordinated approach with other member states would have been more appropriate.

The ministry replied in an email that France is regularly in touch with the European Commission on issues relating to the taxation of tobacco products within the European Union.

“The revision of the 2011 directive on the structure and rates of excise duties applicable to manufactured tobacco products was initiated by the European Commission at the end of 2020,” the ministry said.

“The aim of the review is to achieve greater tax convergence on tobacco within the EU. We hope that this review will be completed rapidly, in order to achieve the EU tobacco control targets set for 2021, i.e. to reduce the share of the population using tobacco to less than 5% by 2040,” the ministry concluded.