Government wants to put a stop to heated tobacco

The government wants to create a new tax category for heated tobacco, with the aim of discouraging its consumption, as part of the Social Security Financing Bill (PLFSS). Although the PLFSS has not yet been adopted by Parliament, it constitutes a serious setback in the commercial strategy of Philip Morris France.

The government has indicated that it wants to index cigarette taxes to inflation levels and, in order to avoid a shift in consumption to new tobacco products, to create a specific tax category for heated tobacco.[1].

Current taxation very favorable to heated tobacco

Currently, heated tobacco is classified in the tax category of "other smoking tobacco", in the same way as hookah or blunts. Under this classification, heated tobacco, which comes in the form of mini-cigarettes, benefits from a clear tax advantage compared to manufactured cigarettes. For example, a pack of Marlboro Red, retailing at 10.5 euros, is made up of 84% of taxes, allowing the manufacturer to generate a margin of 65 cents per pack. However, a pack of Heets mini-cigarettes, retailing at 7.50 euros, is only taxed at 70%, leaving Philip Morris with a profit margin of 1.48 euros. Thus, while the price of a pack of Heets is 29% lower than a pack of Marlboro Red, it allows the manufacturer to generate a profit margin 128% higher.

The PLFSS impervious to the discourse on the “risk reduction” displayed by Philip Morris

The government, by wanting to create a specific tax category, with a taxation of products per unit, should lead to a significant increase in the taxation of these products, and therefore their price. Such a strategy aims to reduce their attractiveness, as highlighted by the PLFSS which indicates that it wants to avoid "promoting the emergence of new products that are just as dangerous", such as heated tobacco. Such a statement seems to demonstrate the fact that the speech made by Philip Morris, aiming to make heated tobacco a risk reduction tool, is failing to convince the French executive. For good reason: no independent study to date has managed to demonstrate that the consumption of heated tobacco results in a reduction in risks compared to the consumption of manufactured cigarettes.

FT

[1] National Assembly, Social Security Financing Bill for 2023, 09/26/2022, (accessed 10/04/2022)