Think Tank Platform Initiative

State of the art on manufactured tobacco

Manufactured tobacco products are among the excisable goods for which a harmonized regulation across the European Union exists. The fiscal treatment of manufactured tobacco products is defined by Directive 2011/64/EU, also known as Tobacco Excise Directive (TED), which defines:

• the categories of manufactured tobacco products (cigarettes and “other tobacco products”)
• the principles of taxation
• the minimum rates and structures to be applied.

The Directive itself requires to evaluate the need for a revision of the rates and structure of the excise duties every four years, in order to make sure that the existing provisions are still aligned with the overall goal of ensuring a proper functioning of the internal market while protecting consumers’ health. After a positive evaluation - achieved in 2015 - another revision has been issued.

The European Commission has concluded that:

• while the current rules work well in terms of predictability and stability for Member State fiscal revenue, they are no longer as effective in deterring consumption
• the emergence of new products, such as e-cigarettes, heated tobacco products and new addictive products reveal the limits of the current legal framework
• a more comprehensive approach, taking on board all aspects of tobacco control including public health, taxation, the fight against illicit trade and environmental concerns, is needed.

The European House-Ambrosetti has an established track record working with the tobacco industry, and this helped us to gain awareness of the disruptive effects of novel tobacco products for the sector itself but also for the regulators. Those products have completely new features (in terms of underlying production processes, technological content just to quote a few) so the regulatory approach needs to consider this novelty.

To create new knowledge, we decided to involve four European Think Tanks with a deep expertise in fiscal related themes (whether or not already applied to the tobacco industry) and direct knowledge of countries that represent an interesting case as far as the adoption of novel tobacco products is concerned.

We also asked and won the support, as industrial partner of the initiative, of Philip Morris International, which allowed us to gain a deep understanding of the industry dynamics both with a historical perspective and with a forward-looking one and to have access to detailed market data for HTP.



In this setting, each of the involved Think Tanks developed a paper on a specific aspect of the fiscal treatment of novel tobacco products, which were evaluated by a panel of experts with a deep understanding of the policy making process .