There is worldwide agreement that tobacco use causes health problems and must be fought. At European Union (EU) level there is general agreement that the harmful effects of tobacco use should be tackled through legislative action. The question is, what legislative measures are required to reduce tobacco consumption?
Since the first cigarette was introduced to the market in London in 1861, tobacco and tobacco products have become subject to extensive regulation and heavy taxation. The introduction of excise taxes was a milestone in this area. While the main objective of the first excise taxes on tobacco was fiscal, their function has changed over the years, and today they are also a tool of public health and social policies.
This situation gives rise to at least three questions. First, what are the most appropriate forms of taxation, especially in the context of the European single market? Second, can health objectives be achieved through tax policy, and should the EU allow price controls in this area?
The EU has gone through a more than thirty-year long process of trying to harmonize tobacco excise taxes within the framework of the internal market, in order to establish the most appropriate taxation. The goal of this process was to harmonize the structure of taxation and tax rates. However, due to national traditions and longstanding historical differences in national tax systems, the EU has failed to impose total harmonization in this area but it has taken steps towards the harmonization of both the tax structure and tax rates.
This article analyses the options for introducing measures designed to reduce the consumption of tobacco within the framework of Union law, without problems arising in relation to the structure of Directive 95/59/EC on taxes other than turnover taxes which affect the consumption of manufactured tobacco. This analysis is based on the Irish, French and Austrian rules for setting the retail prices of tobacco products. The article will specifically focus on minimum prices versus taxes as possible instruments in the fight to reduce consumption.Intertax