Cork: A Council working party met on 14 September to discuss a directive the European Parliament refused to endorse in June and that no presidency has yet found a way to move. The file is the revision of tobacco excise duties, it requires unanimity, and it has now become Ireland’s problem.
The Commission tabled the proposal in July of last year, alongside amendments to the horizontal excise duty directive, and its ambition is considerable. It would raise the minimum rates of excise applied to cigarettes and other manufactured tobacco across the Union, and it would extend harmonised taxation to categories the existing directive, written before most of them existed commercially, does not cover at all: heated tobacco products, electronic cigarettes and their refill liquids, nicotine pouches and raw tobacco.
The gap being closed is real. Because the current framework sets no minimum rates for the newer categories, national treatments diverge wildly, with some member states taxing nicotine pouches at rates comparable to cigarettes and others taxing them at nothing. The predictable consequence is cross-border movement of product within the single market, and the equally predictable consequence of that is a set of member states whose revenue depends on being the cheap jurisdiction and who have no interest whatever in harmonisation.
Parliament’s role here is advisory. Tax files travel under Article 113, which means consultation rather than co-decision, and the Council may adopt a text over Parliament’s objection. The vote in June was nonetheless striking: the chamber rejected its own committee report by 439 to 181, a margin reflecting a coalition of members who thought the proposal went too far and members who thought it did not go far enough, voting the same way for opposite reasons. It settled nothing, and it removed whatever political cover the file might have offered a presidency willing to push.
Unanimity is the binding constraint and always has been. Objections fall into three groups that do not share a common answer. Producing member states, several of them in the east and south, object to rate increases that would hit domestic industry and cross-border retail. A second group objects on subsidiarity grounds to the Union setting minimum rates for products that are the subject of active national public health policy. A third group, generally those with high rates already, supports the proposal precisely because harmonisation upward would narrow the price differentials that feed illicit trade across their borders. Any two of those groups can be satisfied at the expense of the third.
There is a budgetary dimension that keeps the file from being quietly shelved. The Commission’s own-resources proposals for the next multiannual financial framework include a stream derived from tobacco excise, which would transfer a share of national receipts to the Union budget. That connection makes the directive part of a larger negotiation in which member states are already resisting new own resources on principle, and it has arguably made the tax file harder rather than easier to move.
The Irish presidency has signalled it will keep technical work going at working party level, which is what presidencies say about files they do not expect to conclude. Technical work on this proposal means agreeing definitions for product categories and transition periods for rate increases, both of which are genuinely necessary and neither of which resolves the disagreement about the rates themselves.
The current directive remains in force. It will continue to remain in force for as long as one capital says no.
