Germany: Tobacco lobby behind new tax law

Despite their international commitments and obligations, the German government remains largely influenced by the tobacco lobby in its efforts to combat smoking. This is evidenced by the new tobacco tax law, which includes measures that are favorable to the industry. This is what a new report reveals.[1] on tobacco industry interference in Germany, presented by the Global Centre for Good Governance in Tobacco Control (GGTC) and supported by the German Cancer Research Center, Unfairtobacco and eleven other organizations[2].

There were extensive consultations with the tobacco industry prior to the adoption of the new law, and the Finance Ministry declined to provide information on the content of the talks. Every year, 127,000 people die prematurely from smoking in Germany. However, there is currently no binding strategy to reduce tobacco consumption, and the regulations in place are rather favourable to the tobacco industry compared to other European countries.

Germany last in European anti-tobacco rankings

Germany has ratified the WHO Framework Convention on Tobacco Control (FCTC) in 2004, but it still lags far behind in its implementation of the treaty's measures. The country ranks last in the European ranking of tobacco control policies, which covers 36 countries.[3]. In May 2021, more than 50 public health and civil society organizations published a “ Strategy for a tobacco-free Germany 2040 » - a call on the German government to develop a plan with a concrete timetable to implement tobacco control measures such as increasing tobacco taxes, introducing plain packaging, a complete ban on tobacco advertising, promotion and sponsorship, and provisions to help smokers quit. The aim is to reduce the consumption of tobacco and nicotine products to less than 5 % among adults aged 18 and over and to less than 2 % among young people by 2040. One of the main obstacles to progress in tobacco control in Germany remains the influence of the tobacco industry in shaping public policies.

New Tobacco Tax Law Favors Tobacco Industry

In recent years, the tobacco industry has called for moderate increases in tobacco taxes to increase its profit margins and has lobbied the government hard on this issue. Between 2018 and 2020, at least eight meetings were held on this issue, attended by high-level government officials – most of them from the Ministry of Finance – in addition to tobacco industry representatives.[4].

At the beginning of 2021, German Finance Minister Olaf Scholz presented proposals for the modernization of tobacco taxation.[5]. Highlights of the bill included: gradually increasing taxes on manufactured cigarettes and rolling tobacco over the next five years (2022-2026); taxing heated tobacco cigarettes at the same rate as manufactured cigarettes; and introducing a tax on nicotine in e-cigarette liquids. The bill was classified as “particularly urgent” to ensure it could be passed before the summer recess and the federal election in September 2021. The bill set tobacco taxes for the next five years – extending beyond the current Parliament and even beyond the next federal election in 2025.

The bill presented by Mr. Scholz contains arguments that echo those of the tobacco industry. One of the main objectives of the bill, for example, is to prevent consumers from switching to “tobacco products that are not taxed at the national level and/or are illegal”. The tobacco industry often claims that increasing tobacco taxes would increase illicit trade and exaggerates the extent of this trade. However, tobacco taxes are not a key driver of illicit trade. In the draft bill, the ministry argues that to prevent illicit trade, tax increases should take into account "the buffer function of rolling tobacco by deliberately creating a tax differential compared to cigarettes "Cheap tobacco products should be taxed "appropriately". For the Ministry of Finance, it was also important to create "planning security and predictability of future tobacco tax revenues", and "to achieve a balance between the objective of constant tax revenues and public health objectives".

Insufficient taxation from a health policy perspective

The taxation model developed in the draft law is not in accordance with the guidelines for the implementation of Article 6 of the WHO FCTC which regulates tariff and tax measures, and the WHO recommendations of 2010 and 2021 on tobacco taxation[6] that are based on best practices and scientific data. Increasing tobacco taxes is one of the most effective ways to motivate consumers to quit smoking and prevent young people from starting to smoke. It is recommended that tobacco taxes be increased to significantly reduce accessibility to the product with sufficiently high levels, of the order of 10 %. Such an increase induces an average reduction in demand of approximately 4%. However, the tax increases in the bill would only increase the price of cigarettes by 3%. This could also give the industry more flexibility to increase the prices of so-called "premium" brands to increase their profits and to decrease the prices of cheaper brands to discourage consumers from quitting smoking.[7].

Furthermore, to avoid consumption shifts between products, all tobacco products should be taxed uniformly. Therefore, rolling tobacco and heated/grilled tobacco should be taxed at the same rate as conventional manufactured cigarettes, contrary to the final decision to deliberately keep taxes on both products low.

On 10 June 2021, the Federal Parliament adopted the law with slight amendments, less ambitious than the initial draft: the increases in cigarette taxes will be slightly higher and carried out in 4 stages by 2026; the same applies to taxes on rolling tobacco; taxes on heated tobacco will only represent 80 % of those applied to manufactured cigarettes instead of the 100 % initially planned. An additional tax on shisha tobacco is also planned. E-cigarette liquids will be taxed by volume and not according to nicotine content. According to the GGTC expert group, this tax legislation is considered weak or even ineffective and does not meet health requirements. Article 5.3 of the WHO Framework Convention on Tobacco Control (FCTC) However, it requires that Parties to the FCTC limit their interactions with industry as much as possible.

Keywords: Germany, taxation, interference, tobacco industry, taxes, Olaf Scholz

©Michael Kappeler/dpa/picture-alliance/Newscom/MaxPPP©Tobacco Free Generation

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[1] Germany Tobacco Industry Interference Index, Global Center for Good Governance in Tobacco Control, September 8, 2021, accessed September 13, 2021[2] Press release, Einfluss der Tabakindustrie auf Regierung Gesundheits- und zivilgesellschaftliche Organizationen fordern Transparenz, September 8, 2021, accessed September 13, 2021[3] Tobacco Free Generation, Atlas 2020 Tobacco in Germany: Worrying situation, December 23, 2020, accessed September 13, 2021[4] Die Bundesregierung (2021) 'Drucksache 19/26014: Antwort der Bundesregierung auf die Kleine Anfrage der Abgeordneten Niema Movassat, Dr. André Hahn, Gökay Akbulut, weiterer Abgeordneter und der Fraktion DIE LINKE. Druckbag 19/25566'. https://dip21.bundestag.de/dip21/btd/19/260/1926014.pdf[5] Reference condition: Entwurf eines Gesetzes zur Modernisierung des Tabaksteuergesetzes (Tabaksteuermodernisierungsgesetz – TabStMoG, Deutscher Bundestag[6] Generation Without Tobacco, Raising tobacco taxes an effective but underused measure in the WHO Euro Region, July 2, 2021, accessed September 13, 2021[7] Generation Without Tobacco, Tobacco industry's ploy to lower prices, September 7, 2021, accessed September 13, 2021National Committee Against Smoking |