Ref. Ares(2019)797238 - 11/02/2019
EUROPEAN COMMISSION
DIRECTORATE-GENERAL
TAXATION AND CUSTOMS UNION
Indirect Taxation and Tax administration
Indirect taxes other than VAT
Brussels, 31 May 2018
taxud.c.2(2018)4068098
CED nr 907
Orig.: EN
Poetry: TAXUD (2018) 432
WORKING PAPER
FOR INTERNAL USE
Excise Contact Group of 31/05/2018
Commission européenne, B-1049 Bruxelles / Europese Commissie, B-1049 Brussel - Belgium. Telephone: (32-2) 299 11 11
1. ADOPTION OF THE AGENDA
2. PLANNING OF UPCOMING MEETINGS AND EVENTS OF RELEVANCE TO TRADERS
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of Europe
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r
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5. Treatment of processed raw tobacco
A Trade Federation
Delegation 14 presented the diverging interpretations of Eko-Tabak
judgement and the concerns of Member States (available on CIRCABC). The
Delegation stated the key issues and briefly explained each one of them:
1. Eko-Tabak judgement
a. Background information
b. Examples of unmanufactured tobacco (raw tobacco)
c. Examples of smoking tobacco
d. Diverging interpretation in EU Member States & Impact
2. Smoking test
a. Background information
b. Practical case
3. Conclusion
4. CECCM’s suggestions
The Trade Federation
Delegation15 concluded by underlying the following points:
• They argued that the smoking tests should not be applied for excise classification,
and referred to Advocate General Kokott who maintained that the excise
classification should be performed on the basis of the Excise Directive and not the
Combined Nomenclature
• They acknowledged that there is a major issue with the movement of illegal tobacco
in the EU and are willing to collaborate with the Commission and the Member
States to find a practical and efficient solution as they consider EMCS to be
ineffective for this issue
• They proposed to reconsider the distinction of the application of customs rules and
excise rules for treatment of excisable goods
• Regarding to Eko-Tabak, they recognised that the system was abused by fraudulent
traders and suggested to consider applying targeted measures to tackle that issue.
One solution would be to review the Tobacco Excise Directive to include clearer
definitions. Since this option is time consuming, a more immediate solution would
be to impose rules through a system of licensing and a system of control of
movement (EMCS)
A Trade Federation
Delegation 16 highlighted that any broadened interpretation of the
smoking tobacco definition that includes processed raw tobacco as excise goods, will pose
considerable threat to their business and their members, including the livelihood of
thousands of tobacco farmers and farm workers. They added that recent interpretations of
the smoking tobacco definition have led some customers to request that they operate via
EMCS which is not feasible as they do not have Tax Warehouses, and that caused a lot of
14 Confederation of European Community Cigarette Manufacturers (CECCM)
15 CECCM
16 CELCAA
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consternation to their members. The same Trade Federation
Delegation requested that the
Commission and the Member States try to understand how their business works, and to
craft the legislation so as to not put their products under excise tax, otherwise their business
will be less competitive with the tobacco growers and processors outside the EU.
They emphasised that they ship cartons of 40-200 kilograms which contain products not
intended for retail sale. Another Trade Federation
Delegation17 shared the same concerns as
CECCM and CELCAA, and explained that the disputed interpretation has created
substantial obstacles to the free circulation of goods with obvious economic impact to
European smaller companies. They supported that unmanufactured tobacco should not be
excisable and subjected to EMCS, and that EMCS can work only if harmonization through
the Union is ensured. A third Trade Federation
Delegation18 fully supported the point of
view and arguments of CECCM.
A Member State
Delegation19 was of the opinion that this subject could only be addressed
at the European level by a joint approach, and that steps taken individually by Member
States present a risk of fragmentation and would cause problems in the EMCS for economic
operators. Another Member State
Delegation20 stated that they will provide their position at
the appropriate meeting or forum. A Trade Federation
Delegation21 concurred with the
European joint approach that was proposed earlier, and that the current forum is not the
appropriate one to discuss policy measures, and suggested that a Fiscalis PG would be more
ideal.
A Trade Federation
Delegation22 from the wine industry argued that the companies in their
industry are mainly small family businesses and use the EMCS without any issues. The
Chairman underlined that the problem is not EMCS but the requirement to have Tax
Warehouses, and assured that all the proposed suggestions will be taken on board by the
Commission. In addition, the
Chairman identified two aspects of the issue especially
regarding illicit trade: (a) the classification issue between raw and smoking tobacco, (b) the
use of EMCS without involving Tax Warehouses which should be possible within the next
two years. A Member State
Delegation23 noted that it is very difficult to register and track
the raw tobacco producers in EMCS. In our Member State, the row tobacco producers and
the producers of partially processed tobacco are registered in a national register. A Trade
Federation
Delegation24 clarified that the tobacco industry is not questioning the efficiency
of EMCS in general and also not the cost. Rather the delegation noted that there is a much
larger number of illegal traders in tobacco compared to the wine industry.
17 European Smoking Tobacco Association (ESTA)
18 European Cigar Manufacturers Association (ECMA)
19 MS-DE
20 MS-ES
21 CECCM
22 ETRC
23 MS-RO
24 CECCM
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Having encountered problems with other Member States concerning the definition of raw
and smoking tobacco, a Member State
Delegation25 explained that the main issue is the
definition and not the classification; for example, according to CECCM, tobacco refuse is
considered raw tobacco, whereas according to the excise definition in Article 5, it is
considered manufactured tobacco. Therefore, the Member State
Delegation supported that
the nature of the product must be taken into account, and acknowledged that it is a very thin
line between raw and manufactured tobacco. Nevertheless, further discussions should be
initiated in order to come to a harmonised conclusion.
COM pointed out that the Commission cannot provide final interpretation of the legal text
as this is conducted only by the Court of Justice.
COM noted that this item will be added to
the next ITEG meeting in November 2018 in order to further discuss the Eko-Tabak
judgement, the possibilities to reduce illegal trade, and the increase of monitoring and
control. A Fiscalis PG will be also planned for the discussion with the trader federations.
On the longer term, the Commission is looking into the Tobacco Directive with possible
revisions concerning the rates, structures, e-cigarettes, and heated tobacco products.
COM reminded that a questionnaire was sent to the Member States where they can disclose their
views including their views on the definition of Article 5 of the Tobacco Directive.
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