REGULATORY SCRUTINY BOARD OPINION Impact assessment / Revision of the Directive on the structure and rates of excise duty applied to manufactured tobacco products

EUROPEAN COMMISSION
07/07/2025
SEC(2025) 560
{COM(2025) 580}
{SWD(2025) 560-561}
REGULATORY SCRUTINY BOARD OPINION
Impact assessment / Revision of the Directive on the structure and rates of excise
duty applied to manufactured tobacco products
Offentligt
KOM (2025) 0580 - SEK-dokument
Europaudvalget 2025
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This opinion concerns a draft impact assessment which may differ from the final version.
Commission européenne, B-1049 Bruxelles - Belgium. Office: BERL 02/352. E-mail: regulatory-scrutiny-board@ec.europa.eu
EUROPEAN COMMISSION
Regulatory Scrutiny Board
Brussels,
RSB/
Opinion
Title: Impact assessment / Revision of the Directive on the structure and
rates of excise duty applied to manufactured tobacco products
Overall opinion: POSITIVE
(A) Policy context
Council Directive 2011/64/EU lays down the EU rules for the taxation of manufactured
tobacco products by setting the structure and minimum rates of excise duty. It aims to
ensure the proper functioning of the internal market and to provide a high level of health
protection. In recent years, new tobacco products have emerged (such as e-cigarettes,
heated tobacco products), but the current scope and provisions of the Directive are not
adapted to cope with these new market developments. The Directive also falls short in
reducing illicit manufacturing of tobacco products in the EU and fighting tax fraud and tax
evasion due to illegal trade.
This revision aims to address the current shortcomings and is part of a wider review of the
existing acquis in the area of tobacco control, including reviewing the Tobacco Products
Directive, updating the Council Recommendation on Smoke-Free Environments, linked to
the Beating Cancer Plan, and to implementing the WHO Framework Convention on
Tobacco Control.
(B) Summary of findings
The Board notes the useful additional information provided in advance of the
meeting and commitments to make changes to the report.
The Board gives a positive opinion. The Board also considers that the report should
further improve with respect to the following aspects:
(1) The report does not sufficiently assess the expected impacts on economic
operators, in particular Small and Medium-sized Enterprises. Regional and social
impacts are not sufficiently assessed. The risk of unintended consequences
including the increase of illicit trade in tobacco products is not sufficiently
analysed.
(2) The report does not sufficiently detail all costs and benefits of the options under
each policy area nor the combined impacts of the preferred option.
(3) The report does not sufficiently indicate how future-proof the revision is.
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(C) What to improve
(1) The report should make better use of the available evidence to better demonstrate how
taxation can be an effective and critical policy instrument to reduce tobacco
consumption on health grounds. The problem section should more clearly link the
problems and their drivers with the scope and objectives of the revision. The report
should add a visual setting out the intervention logic underpinning the revision of the
Directive.
(2) The report should further assess how economic operators will be impacted. The
impacts should be presented in a more detailed and systematic way whenever
disaggregated data is available. This should include the assessment of the impacts on
SMEs on the basis of the SME test. The mitigation measures should be made more
explicit. The analysis should also include a territorial impact analysis, since tobacco
producers seem to be concentrated in a limited number of geographic clusters. Given
this concentration, the report should assess potential labour and social impacts for the
regions concerned.
(3) The report should better explain the risk of potential unintended consequences. In
particular, the risk of the increase in the illicit trade of tobacco products caused by
higher prices should be assessed, taking into account the importance of other, non- tax
specific, factors.
(4) The report should better explain the econometric modelling of the expected reduction
in tobacco consumption and additional tax revenue, integrating it with the recent
available evidence of consumers’ behaviour during the Covid-19 emergency. It should
explain how the expected reduced sales and reduced demand were factored into the
estimates of additional tax revenues. It should clarify how the potential increase in
illicit trade was included in the modelling.
(5) The report should improve the cost benefit analysis with a more systematic and
comparable approach and clearer presentation. It should provide the assessment of all
types of relevant impacts for all options. It should be clearer about the health benefits
and explain why they were not estimated for the options related to enlarging the scope
to new products and raw tobacco. The report should provide overview tables of costs
and benefits under each policy area and for the preferred option, including costs and
cost savings in scope of the One In, One Out approach.
(6) The report should indicate in more detail to what extent the preferred option is future-
proof. It should better explain the effect of inflation on the success of a PPP-based EU
excise duty system. It should clarify which other variants or combinations of the
proposed partial PPP system have been assessed and better justify the one included in
the preferred option.
(7) The report should more systematically present the views of different stakeholder
categories throughout the text, in particular on the problems, options and their impacts.
The Board notes the estimated costs and benefits of the preferred option(s) in this
initiative, as summarised in the attached quantification tables.
Some more technical comments have been sent directly to the author DG.
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(D) Conclusion
The DG must take these recommendations into account before launching the
interservice consultation.
If there are any changes in the choice or design of the preferred option in the final
version of the report, the DG may need to further adjust the attached quantification
tables to reflect this.
Full title Revision of the Council Directive 2011/64/EU of 21 June 2011
on the structure and rates of excise duty applied to
manufactured tobacco products
Reference number PLAN/2020/8656
Submitted to RSB on 22 June 2022
Date of RSB meeting 19 July 2022
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ANNEX – Quantification tables extracted from the draft impact assessment report
The following tables contain information on the costs and benefits of the initiative on
which the Board has given its opinion, as presented above.
If the draft report has been revised in line with the Board’s recommendations, the content
of these tables may be different from those in the final version of the impact assessment
report, as published by the Commission.
I. Overview of Benefits (total for all provisions) – Preferred Options
Description Amount Comments
Direct benefits
Public health, and
healthcare system
Long-term savings on the social costs of smoking, correlated with the extent of the
tax increase.
Harmonised taxation of new products will reduce affordability, especially for
young people.
Introduction excise duty rates for new products, higher excises for traditional
tobacco product will leads to potentially lower substitutability, cross-border flows
and affordability.
Introduction of the raw tobacco in the scope of the Directive potentially will reduce
availability of low-price illegal products.
Tax revenues for traditional
tobacco products
9 600 Introduction excise duty rates for traditional tobacco products will lead to increase
of revenues for traditional tobacco products EUR 9 600 million.
Reduction in foregone tax revenues due to new category for raw tobacco – EUR 1
000 million.
Tax revenues for new
products
2 400 Introduction excise duty rates for new products will lead to increase of revenues
EUR 2 500 million.
Reduction of tax evasion
and fraud
The expected increase of excise duty revenues, caused by higher rates, could be
largely offset the foregone revenues due a potential increase of illicit trade of
tobacco products.
Introduction of holding, movement and control requirements for new products and
raw tobacco will improve monitoring of cross-border movements of tobacco
products. Less scope for tax evasion and avoidance.
Legal certainty Less scope for misclassification of ‘borderline’ products. Clarifications and
harmonised EU-wide approach to new products and raw tobacco will reduce the
divergent interpretations, administrative difficulties, disputes and associated costs
for Member States and economic operators.
Indirect benefits
Impact on market,
competition and SMEs
Potentially lower substitution between traditional tobacco and new products will
lead to less market and competition distortions.
Harmonisation of taxation of new products will improve market integration and
monitoring of market trends. Economic operators who are currently compliant with
the tax rules will benefit from ensuring their competitors also pay their fair share.
Greater transparency and legal certainty may result in fairer competition and
improve the ease of doing business cross-border. The proposed harmonisation for
new products would help establish a level playing field, whose benefits will be
mostly reaped by small players.
Introduction of control requirements EU level for raw tobacco will reduce the
availability of illicit tobacco and tobacco products in the market, so that legal
players will experience lower competitive pressure from the illegal value chain.
The competitiveness of economic operators will be enhanced because of reduced
availability of low-price illegal products.
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Administrative cost savings related to the ‘one in, one out’ approach
Harmonised EU rules It will eliminate current market barriers preventing economic operators (especially
SME’s) to access other Member States markets (e.g. due to the need to understand
national rules, engage with foreign tax administration, in another language etc.)
Harmonised movement
control requirements
under the Horizontal
Directive
- For new products: it will reduce administrative burden (e.g. in the present
cases, where the shipment is between Member States, one of which treats HTP
as harmonised excise category (OST) and the other - with ad hoc tax regime.
- For raw tobacco: it will lead to the abandonment of part of national control
measures (registration of all entities involved in growing, selling and
manufacturing, registration of buyers, additional control measures (e.g.
additional reporting requirements).
Adoption of appropriate
definitions and tax regime
- For new products: it will remove unintended effect on other products and the
risk of legal and classification uncertainties between HTP and smoking tobacco
products and across new products, what may cause administrative issues.
- For raw tobacco: it will remove the risk of legal and classification uncertainties
between raw and smoking tobacco (e.g. reduction in litigation costs).
II. Overview of costs – Preferred option for the revision of the minimum rates for traditional tobacco products (million euros)
Citizens/Consumers Businesses Administrations
One-off Recurrent One-off Recurrent One-off Recurrent
Direct costs
0.00 For consumers of traditional
tobacco products because of
the increase of the excise
duties (increase of price).
0.00 Market sales of
tobacco products
will decline between
5% and 16%
Minor adjustment
costs for the
implementation of
separate categories for
cigarillos and WPT
0.00
Indirect costs 0.00 0.00 0.00 0.00 0.00 0.00
II. Overview of costs – Preferred option for the introduction in the scope of the Directive of e-cigarettes liquids, HTP, other
manufactured tobacco and related products (million euros)
Citizens/Consumers Businesses1
Administrations2
One-off Recurrent One-off* Recurrent One-off Recurrent
Action
(a)
Direct adjustment
costs
- Set up a tax
warehouse
(investment in
appropriate
premise): 5.7
- Movement control
EMCS (investment
in an IT system): 2.7
Movement
control EMCS
(updating IT
infrastructure):
between 2.7
and 8.1
1
The increase of regulatory costs for operators would be negligible except for SME’s (e-cigarettes sector) for
which would increase by approximately EUR 17 000 year.
2
Regulatory costs incurred by Member States from the extension of holding and movement rules to operators
and products which are not currently in the Directive’s scope. Where national tax regimes are already in
place for new products, additional regulatory costs it is considered negligible.
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Direct
administrative
costs
- Registration in
the excise system
for new operators
(manufacturers and
importers/
wholesalers of e-
cigarettes and other
related products):
1.8
- Operate a tax
warehouse: 25
- Movement control
EMCS (transaction
costs): 0.5
Registration of
economic
operators: 1.5
Registration
of economic
operators:
0.4
Movement
control
EMCS
(transaction
costs): 0.3
Indirect costs Increase of price
due to the
increase of excise
duty rate.
- Holding /
storing guarantee
(financial cost):
fixed by MS and
related to the
amount of duty
suspended on the
excise good held:
0.1
- Guarantee on
movements under
duty suspension
(financial costs): 0.1
Costs related to the ‘one in, one out’ approach
Total
Direct
adjustment
costs
8.4
Indirect
adjustment
costs
Administrative
costs (for
offsetting)
1.8 25.5
Note: No direct regulatory fees and charges and no direct enforcement costs are anticipated.
II. Overview of costs – Preferred option for raw tobacco (million euros)
Citizens/Consumers Businesses Administrations
One-off Recurrent One-off Recurrent One-off Recurrent
Action
(a)
Direct adjustment
costs
- Movement control
EMCS (investment in
an IT system): 0.7
Movement
control EMCS
(updating IT
infrastructure):
between 2.7
and 8.1
Direct
administrative
costs
- Registration in
the excise system
for operators
involved in raw
tobacco business
(assuming that in
the 15 MS where
the fiscal regimes
are in place,
operators are
already deemed
compliant): 0.09
- Movement control
EMCS (transaction
costs): 0.3
Movement
control
EMCS
(transaction
costs): 0.4
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Indirect costs
Costs related to the ‘one in, one out’ approach
Total
Direct
adjustment
costs
2.2
Indirect
adjustment
costs
Administrative
costs (for
offsetting)
0.15 0.7
Note: Considering the zero-rate option, operators are assumed to use the duty-paid procedure instead of duty
suspension and not to use tax warehouse. Regulatory costs for public administrations linked to registration of
economic operators are insignificant (one-off cost of €400 per operator plus €100 for annual renovation). It is
also assumed that collective organisations operate on behalf of individual growers.
Electronically signed on 22/07/2022 12:08 (UTC+02) in accordance with Article 11 of Commission Decision (EU) 2021/2121