The European Commission today unveiled steps to tighten taxes on cigarettes and tobacco across the EU, in an effort to encourage people to stop smoking and combat smuggling.
Under the plan, the minimum tobacco tax level for cigarettes and fine cut tobacco in the 27 EU nations would gradually increase over the next six years to 63% of the price on average from 57% currently.
The definition of tobacco types would also be tightened, so manufacturers can no longer exploit loopholes enabling them to sell certain cigarettes and tobacco as cigars or pipe tobacco, which benefit from lower taxes.
The tobacco tax level for cigarettes in Ireland is 61.03%. This means that for every pack of 20 cigarettes which costs on average €7.40, €4.51 goes to the state in duty and VAT. However, due to the fact that we have high excise levels on cigarettes already, Ireland will not have to pay the higher taxes.
'Today's proposal supports the EU policy to reduce tobacco consumption and narrow the differences in price levels of tobacco products within the EU,' said Tax Commissioner Laszlo Kovacs.
Price differences, particularly in the eastern and central European countries who most recently joined the bloc, have proved a draw factor for smugglers, and these nations where cigarettes are cheapest will be hardest hit.
'In countries like Denmark or Finland, the price increase will be around 6%. In countries like Poland it will be 46%. So there is a huge difference,' Kovac said.
Currently excise duties imposed by EU states must total at least €64 per 1,000 cigarettes in the 'most popular price category'. By 2014, the price will be €90 for all categories.
The commission said the proposal aims to help reduce tobacco consumption by 10% within the next five years. It would also create a more level playing field for manufacturers and give nations more flexibility to set minimum taxes.