US News Drastic price increases possible: Federal government also wants to raise tobacco tax on e-cigarettes

19:14  15 february  2021
19:14  15 february  2021 Source:   tagesspiegel.de

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With the tax increase, all tobacco products are likely to become more expensive. In the end, even classic cigarettes could be cheaper than their e-competitors.

Deutliche Verteuerung. Die Steuerpläne der Bundesregierung sollen viele Milliarden Euro einbringen. © Friso Gentsch / dpa Significant increase in price. The federal government's tax plans are expected to bring in billions of euros.

The federal government wants to turn the tobacco tax again for the first time in six years. It is aiming for additional income in the double-digit billion range over a period of five years. Contrary to its previous information, the federal government does not want to wait for the proposal of the EU Commission on the taxation of the e-cigarette, which is expected by the end of the year.

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Now Federal Finance Minister Olaf Scholz wants to go it alone nationally to include e-cigarettes in which nicotine-containing liquids are vaporized in the tobacco tax. In addition, so-called less harmful tobacco products (“heat not burn”) such as the Iqos from Philip Morris are to lose their tax privileges and are taxed in the same way as filter cigarettes. The CDU, CSU and SPD agreed on this at their last coalition round. Financial leaders of the Union have given up their resistance, it is said.

The details of the next tobacco tax round have not yet been determined. There is a draft bill circulating with the letterhead of the Federal Ministry of Finance, which should come from October. According to this, the first tax step should come as early as the beginning of April, in which the tax on filter cigarettes, fine cut and conventional tobacco products is to be increased moderately, the tax on less harmful tobacco products is to be increased significantly and tobacco tax is to be levied on e-cigarettes for the first time.

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A good eleven billion euros in additional income

This package is intended to generate additional tax income of 11.290 billion euros by the end of 2025. In addition, is expected to bring in the classic tobacco tax 6.6 billion euros, almost three billion euros the new tax on e-cigarettes and almost two billion euros the additional tax on less harmful products. In 2020, tobacco tax revenue totaled 14.6 billion euros.

According to information from the Tagesspiegel, the Chancellery has decided to postpone the reform to early 2022. There is no longer enough time until April to pass the law by then. In addition, the industry needs more time to convert. So far, the tobacco tax department in the Federal Ministry of Finance had always excluded tax steps during the year.

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Question marks stand behind the proposed tax increases. The announced tax steps would make e-cigarettes drastically more expensive. The nicotine-containing liquid of 10 milliliters, which currently costs five euros, would already be four euros more expensive in the first tax step. In the second step, which should come in 2024, the tax component would then even increase to up to eight euros for a bottle (ten milliliters) with nicotine-containing liquid for vaping.

e-cigarettes more expensive than normal cigarettes?

It would be very surprising if the coalition would make the consumption of e-cigarettes so drastically tax-expensive. Finally, there is consensus among the scientists that the health risks are significantly lower when vaping than when smoking a cigarette. The background to this is that by-products of the combustion process in classic filter cigarettes are highly carcinogenic, which are not found when inhaling the vapor of the e-cigarette. Dustin Dahlmann from the Alliance for Tobacco Free Enjoyment warns: “With the planned tax, the much less harmful e-cigarette would be significantly more expensive than tobacco products.”

Less harmful tobacco products such as the Iqos from Philip Morris are also expected to rise sharply in price. A box of 20 sticks currently costs six euros and, according to plans, would increase to eight euros from 2022 due to the tax increase. According to the plans, the tax component for every box of 20 filter cigarettes is to increase by a little more than eight cents each year.

Jan Mücke, head of the German Cigarette Association, warns: "Further tax increases will force even more price-sensitive smokers into the fine cut and make them resort to smuggled and counterfeit cigarettes." According to surveys by the association, the share of cigarettes not taxed in Germany will be 17 percent in 2020 gone up. Even more cigarettes had been smuggled in from low-tax countries, and even more smokers had caught the forgeries. The fine cut has also increased by ten percent.

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