Italy: Tax relief on heated tobacco products raises questions

The company Casaleggio Associati, linked to the 5 Star Movement, the Italian government party, is said to have received 2 million euros from cigarette manufacturer Philip Morris between 2017 and 2020.

In late November 2020, the Italian political news daily Il Riformista revealed that Casaleggio Associati, “the company entrusted with the task of organizing the internal democracy of the M5S [5 Star Movement[1]]”, received more than 2 million euros from Philip Morris for consulting between September 2017 and October 2020[2].

However, the party, which entered government in 2018, subsequently reduced taxes on heated tobacco products by 75 %[3], “a sector which particularly interests the American cigarette manufacturer”[4], rightly points out the journalist Gaël de Santis, who echoes the revelation of Il Riformista in L'Humanité.

While the Italian daily is unable to prove that the company Casaleggio Associati, which received money from Philip Morris, used its influence over M5S MPs to obtain a tax break on heated tobacco products, “the coincidence is disturbing”[5], continues Gaël de Santis.

When asked, the European Commission sees no “reason for intervention”

Following this reduction in taxes on heated tobacco products in Italy, the European Commission was alerted for the first time on May 22, 2020[6]. On 29 September 2020, MEP Danilo Oscar Lancini relaunched the Commission on this issue[7]. He specified in his question to the Commission that the loss of revenue for the Italian State induced by this tax development was estimated at 500 million euros per year. However, the resources that would have been provided by the taxation on heated tobacco products without this tax reduction were to be used for the three-year plan for access to treatment for the most vulnerable people, the need for which has become more urgent with the Covid-19 pandemic. For the MEP, “This makes the tax relief in question even more questionable and indefensible”[8].

On 26 November 2020, European Commissioner Margrethe Vestager responded to the MEP's question as follows: "The Commission services have duly examined the information received. In the absence of any evidence of a potential breach of State aid rules, the Commission services see no grounds for intervention."9].

At the end of May 2020, EU countries wanted a review of taxes on heated tobacco

The tax break granted in Italy on heated tobacco products is all the more surprising given that at the end of May 2020, European Union (EU) countries had submitted a request to the Commission to align the taxation of heated tobacco products and e-cigarettes with that of traditional tobacco products, as reported by EURACTIV journalist Sarantis Michalopoulos in an article published on 27 May 2020[10].

A draft EU Council conclusion stated: “The current provisions of Directive 2011/64/EU[11] have become less effective, as they are no longer sufficient or too precise to address current and future challenges posed by certain products, such as e-liquids, heated tobacco products and other new generations of products entering the market. [...] It is therefore urgent and necessary to improve the EU legislative framework, in order to address current and future challenges posed by the functioning of the internal market, by harmonising the definitions and the tax regime of [these] new products […] to avoid legal uncertainty and regulatory disparities within the EU”[12].

For example, if liquids intended for electronic cigarettes are regulated from a health point of view by a 2014 directive[13], there is no European legal framework for their taxation, unlike what exists for traditional tobacco products. This results in a huge disparity between the different EU countries in terms of taxation on these products. “Some Member States tax e-liquids […] at different rates, while others do not tax them at all”[14], specified Sarantis Michalopoulos.

In conclusion of his article, he wrote: “The next challenge will be to resist the pressure that the tobacco industry will undoubtedly exert on national governments in order to pay as little tax as possible.”15]. In light of the facts revealed by Il Riformista, it seems that the Greek journalist was right.

©Generation Without Tobacco

---

[1] Movimento 5 Stella. [2] Gaël De Santis, The 5 Star Movement goes up in smoke, L'Humanité (November 30, 2020, consulted December 3, 2020). [3] Question for written reply E-005323/2020 to the Commission, europarl.europa.eu (29 September 2020, accessed 3 December 2020). [4] Gaël De Santis, The 5 Star Movement goes up in smoke, L'Humanité (November 30, 2020, consulted on December 3, 2020). [5] Ibid. [6] Question for written reply E-005323/2020 to the Commission, europarl.europa.eu (29 September 2020, accessed 3 December 2020). [7] Ibid. [8] Ibid. [9] Answer for question E-005323/20, europarl.europa.eu (November 26, 2020, accessed December 3, 2020). [10] Sarantis Michalopoulos, Morgane Detry (translation), Member states want to tax e-cigarettes and heated tobacco products, euractiv.fr (May 27, 2020, consulted December 3, 2020). [11] Council Directive 2011/64/EU of 21 June 2011 on the structure and rates of excise duty applied to manufactured tobacco, eur-lex.europa.eu (July 5, 2011, accessed December 3, 2020). [12] Sarantis Michalopoulos, Morgane Detry (translation), Member states want to tax e-cigarettes and heated tobacco products, euractiv.fr (May 27, 2020, consulted December 3, 2020). [13] Directive 2014/40/EU of the European Parliament and of the Council of 3 April 2014 on the approximation of the laws, regulations and administrative provisions of the Member States concerning the manufacture, presentation and sale of tobacco and related products, and repealing Directive 2001/37/EC, eur-lex.europa.eu (April 29, 2014, accessed December 4, 2020). [14] Sarantis Michalopoulos, Morgane Detry (translation), Member states want to tax e-cigarettes and heated tobacco products, euractiv.fr (May 27, 2020, consulted December 3, 2020). [15] Ibid. DNF - For a Zero Tobacco World |