Colm Burke (Cork North Central, Fine Gael)
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132. To ask the Minister for Finance his views on the proposal outlined in the European Commission public consultation on updating the rules on excise duties for manufactured tobacco products for the equalisation of the tax treatment of roll your own, heated tobacco products and other alternative products with that of cigarettes; the estimated likely impact on revenue generation and illicit trade should such a proposal be enacted in Ireland and across the European Union; and if he will make a statement on the matter. [49742/21]

Paschal Donohoe (Dublin Central, Fine Gael)
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Council Directive 2011/64/EU sets out EU rules on the structure and rates of excise duty applied to manufactured tobacco. The Directive defines and classifies various manufactured tobacco products according to their characteristics and lays down the relevant minimum rates of excise duty for the different types of products. The purpose of the Directive is to ensure the proper functioning of the internal market and a high level of health protection.

Every four years, the European Commission is required to submit a report to the Council on the rates and the structure of excise duties, accompanied – where appropriate – by a proposal for the revision of the Directive. The latest report was prepared by the Commission on 10 February 2020 and on 2 June 2020 the Council approved conclusions setting out its priorities in relation to the review of the Directive. A public consultation, open between 30 March 2021 and 22 June 2021, sought to ensure that all relevant stakeholders had an opportunity to express their views on the current rules and on possible changes to these rules. The Commission is expected to bring forward a new legislative proposal later this year or early in 2022 and the impact of this can be assessed when the proposal is available.

The Commission Report and the Council conclude that it is necessary to upgrade the EU regulatory framework, in order to tackle current and future challenges in respect of the functioning of the internal market by harmonising definitions and tax treatment of novel products (such as liquids for e-cigarettes and heated tobacco products), including products that substitute tobacco, in order to avoid legal uncertainty and regulatory disparities in the EU. Revision can also address the issue of tax-induced substitution across products and enable further measures to combat the illicit trade in tobacco to address tax control, revenue collection and health protection issues.

Ireland welcomes the review of the Directive to ensure that the rules remain fit for purpose, safeguard the proper functioning of the internal market and, very importantly, provide for a high level of health protection. This latter point is particularly significant in the context of the European Action Plan against Cancerand our own national policy, Tobacco Free Ireland, both of which recognise that taxation plays a pivotal role in reducing tobacco consumption, in particular in deterring youth from smoking.

Ireland is committed to a policy of high taxation of tobacco to encourage people to quit smoking. As of October 2021, the cost of a pack of 20 cigarettes in the most popular price category stands at €14.50 and a typical 30 gram pack of RYO tobacco is around €20.50.

Budget practice is to decide on a defined tax increase (inclusive of VAT) on a packet of 20 cigarettes in the most popular price category, with pro rataincreases on the other tobacco products. Cognisant that the relatively lower cost of roll-your-own (RYO) tobacco products can incentivise their use, and therefore seeking to progressively reduce that price differential, additional excise increases in respect of RYO were included in the 2013, 2014, 2017, and 2018 Finance Acts.

In addition to seeking to narrow the price gap between RYO and cigarettes, by way of additional excise increases on RYO, Government health and social policy has focused on the further denormalisation of smoking generally as consumption of tobacco products remains one of the greatest avoidable and preventable health risks in our society. Similar considerations arise in respect of heated tobacco products and other alternative products. While heated tobacco products are not currently available on the Irish market, I am informed by Revenue that, in the event that they are introduced, the current national tobacco tax provisions are sufficiently broad to ensure that they will fall to be taxed as smoking tobacco.

Of course, one consequence for a country such as ours with a high taxation policy approach to tobacco, is that this increases the likelihood of smuggling and illicit activity.Revenue is very conscious of the threat that tobacco smuggling poses to health, to legitimate business interests, and to the Exchequer, and Revenue continues to make tackling the problem a priority.

It is also the case that tobacco products can be legally brought into the country legitimately: whether duty-paid from other EU states, or as duty-free from a third country. In this regard and in parallel with the revision of Council Directive 2011/64/EU, we welcome the fact that the Commission has commissioned a study to assess Articles 32 and 36 of Council Directive 2008/118/EC concerning the general arrangements for excise duty. The study is focussing on the cross-border acquisition of excise products by private individuals and cross-border distance selling, and the study should help inform this aspect of tobacco policy into the future.