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Ref. Ares(2015)4828441 - 04/11/2015
doc 11
Indirect Taxation and Tax administration 
  Indirect taxes other than VAT 
Brussels, 24.9.2015 
CED N° 862 

Tobacco Taxation:  
Update on the work of Fiscalis Project Group on Tobacco  
(FPG 050) in 2015 
Meeting of 27 & 28 October 2015 

In the context of possible revision of Directive 2011/64/EU on the structure and rates of 
excise duty applied to manufactured tobacco, the European Commission established a 
Fiscalis Project Group on Tobacco (FPG 050). This FPG looks into the classification of 
(new) products in the scope of excisable tobacco products and in particular two 
recommendations of the study on excise duties on manufactured tobacco1. These 
recommendations were to analyse further the possibilities to include electronic cigarettes 
and raw tobacco in the scope of excisable goods.  
However raw tobacco is the raw material for excisable tobacco products and as such it is 
not covered by the Directive 2011/64/EU. The study on tobacco taxation identified two 
problems with raw tobacco. 
•  It appears that raw tobacco is being sold at retail level, directly to end-consumers, 
without excise duties; 
•  It has been reported that raw tobacco was being diverted from legal to illegal 
trade circuits. 
Concerning e-cigarettes, the study signalled that the exclusion of e-cigarettes from the 
scope of excisable products might have significant long term budgetary implications for 
Member States. Besides that, the proper function of the internal market might be 
jeopardized by the introduction of national taxes in an uncoordinated way, resulting in 
disparate fiscal treatment across the EU in the future.  
Working in partnership with DG TAXUD, the Directorate General for Health and Food 
Safety (DG SANTE) and the Joint Research Centre (DG JRC) are involved in the work 
of the FPG. In order to take the opinions and experiences of experts from Member States 
into account, 4 meetings of the FPG have taken place in 2015. Consequently the 
Commission would like to give an update on the current thinking of the FPG. In this 
document the general conclusions of the FPG, the remaining questions, feedback from 
industry and next steps have been set out. 
2.1. General conclusions  
In the 4 meetings that took place, the FPG mainly focused on e-cigarettes. From those 
discussions, it is clear that the e-cigarette market is a rapidly evolving market but one 
where not all the required information is yet available. The following conclusions were 
drawn during the meetings: 
Harmonised approach vs national taxation 

1   'Study on the measuring and reducing of administrative costs for economic operators and tax 
authorities and obtaining in parallel a higher level of compliance and security in imposing excise 
duties on tobacco products', Ramboll 2014, TAXUD/2012/DE/341, see:

•  Some participants felt that essential information to establish a position was 
missing. They would like to obtain reliable data about the number of users to 
estimate possible revenues compared to enforcement costs for the government 
and the administrative burden for economic operators. Some participants also felt 
that more information is needed on the impact of these products from a health 
•  Maintaining the proper functioning of the internal market would be the rationale 
for COM to consider a harmonised initiative for taxation of e-cigarettes.  
2.2. Remaining questions 
Because e-cigarettes are relatively new on the market, the FPG concluded that there is a 
lack of information. Especially the official information on the size of the market is 
limited, which makes it difficult to estimate the costs of taxation. The lack of clarity 
around the health impacts of these products was also noted. 

2.3. Feedback stakeholders 
COM has been in contact with many stakeholders such as operators producing or selling 
e-cigarettes on the EU market, tobacco industry owning e-cigarette brands, trade 
associations and non-governmental organisations. The feedback of stakeholders on the 
possible taxation of e-cigarettes can be summarised as follows: 
A Separate initiative for e-cigarettes 
Extending the scope of the current Directive 2011/64/EU to e-cigarettes would, in their 
opinion, not allow enough time for thorough research because the market for e-cigarettes 
and other novel tobacco products is evolving rapidly. Therefore, if taxation of e-
cigarettes were to take place in the future, this should preferably be done through a 
separate 'stand-alone' directive. Most stakeholders recommend to monitor the market and 
wait until the effects of the Tobacco Products Directive (TPD, Directive 2014/40/EU) are 
Small and Medium Enterprises (SMEs) 
Smaller companies and producers expressed their concerns regarding the holding and 
movement provisions if e-cigarettes were to become excisable goods. In their opinion a 
simplified procedure or (at least) a longer transitional period would be justified. 
The work on e-cigarettes is ongoing within the FPG and the work on raw tobacco has 
also recently started. The FPG will therefore continue with the exchange of information 
on e-cigarettes and elaborate the work on raw tobacco.  

The considerations of the FPG will then also be used as input for an Impact Assessment 
on the possible revision of Directive 2011/64/EU. Because some of the identified 
difficulties in the study on tobacco taxation might require revision of the directive, the 
Commission will have to carry out an Impact Assessment according to the Better 
Regulation principles.2 
The Commission will maintain contacts with stakeholders and other jurisdictions with 
experience with e-cigarettes (taxation). 
* * 

2 COM(2015) 215 final, 

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