The European Union (EU) is the region with the highest cigarette prices in the world on average. Each year, high cigarette prices help many European Union residents stick to their long-term goals of living healthy and productive lives. The high cost of cigarettes encourages large number of smokers to quit and discourages millions of non-smokers from taking up the harmful habit.
This huge success in Europe’s sustainable development would not be possible without the EU Tobacco Tax Directive. Through its minimum tax requirements, the Directive is a major driving force behind cigarette tax increases in the region. In addition to improving the health of EU residents, the Directive ensures the proper functioning of the internal EU tobacco market and helps to generate fiscal revenue for Member States.
The Directive, however, is getting old and out of shape. It isn’t keeping up with new developments. The Directive’s minimum tax rates were last updated in 2010, while the rapidly changing tobacco product landscape makes the Directive’s measures less effective. A recent attempt to revise the Directive ended in early 2018, when the European Commission decided not to revise the law. However, encouragingly, a review of the Directive is back on the Commission’s agenda and is now being re-considered.
This Wednesday, the Smoke Free Partnership (SFP) published its position paper on the directive’s revision. The SFP is a Brussels-based initiative focused on supporting tobacco control legislation in Europe and their newly-published position paper entitled “Tobacco Tax for Healthier Europe” is the tobacco control community’s major and strong response to the process of the Directive’s revision. The paper notes the importance of tobacco taxes to the commitment by the EU and its Members States to reduce tobacco use by 30% by 2025, and emphasizes the benefits of further increases in minimum tobacco tax rates, which will result in higher cigarette prices and in convergence of those prices across the Member States. The paper also highlights the major issues that need to be addressed in the Directive’s revision process.
The first pressing issue for the new Directive would be to close the gap in cigarette prices across the EU. Although cigarette prices in the EU have been increasing for over a decade, the differences in prices among EU countries remain large. This means that cigarette prices in countries with historically lower cigarette taxes, mainly in the Eastern and Southern parts of the EU, never caught up with the cigarette prices in the rest of the Europe. In addition, significant differences between cigarette and roll-your-own prices still exist in clear majority of countries. In 2015, smoking 20 roll-your-own cigarettes was, on average, by almost one euro less expensive than smoking a pack of regular cigarettes. This price difference gives an unjustifiable market advantage to roll-your-own cigarettes.
Although the SFP Paper does not address the issue of the inclusion of the Electronic Nicotine Delivery System (ENDS) products in the Directive, this issue is addressed in a recent statement by the organization. The SFP’s statement argues for the inclusion of heated tobacco products in the Directive. It also recommends that while the objective of a broader regulatory framework should be discouraging the use and uptake of e-cigarettes, the focus should still remain at reducing consumption of tobacco leaf-containing products..
The American Cancer Society’s (ACS) Economic and Health Policy Research (EHPR) program contributed significantly to the new recommendations for the EU Directive revision. First, the figures presented in the SFP Position paper are based mostly on the calculations from a recent study published in the Tobacco Control journal and co-authored by EHPR economist, Michal Stoklosa. Second, the SFP’s estimates that higher tobacco taxes amongst EU member countries will save 18.5 million people from tobacco are based on the Prevent20 coalition model also developed by the EHPR. The Prevent20 initiative is a consortium of cancer organizations aiming to actively promote tobacco taxation as a vital public health tool worldwide. ACS continues to support its Prevent20 coalition partners by providing sustained technical assistance in issues around the economics of tobacco control.