PLFSS: the National Assembly will deliberate on tobacco taxation

On October 20, the Social Security Financing Bill (PLFSS) will be examined by the deputies of the National Assembly, after an initial passage in the Social Affairs Committee a few days earlier. The vote on the PLFSS is a pivotal moment for the fight against smoking in France, but also for manufacturers.

The Social Security Financing Bill, emanating from the executive, determines in particular the evolution of taxation on all tobacco products, the most effective tool for reducing tobacco consumption. Presented to the Council of Ministers at the end of September, it was the subject of an initial examination by the Social Affairs Committee, before being examined in plenary session from October 20.

Inflation, rolling tobacco, heated tobacco: what could change

In terms of tobacco, three things should be noted in the PLFSS, as presented by the government. First, an indexation of tobacco taxation on real inflation levels. Until now, the mechanical increase in taxation, in principle indexed to inflation in year N-2, was capped at 1.8%. Given the context of the war in Ukraine and the high levels of inflation currently observed, the PLFSS proposes an indexation to year N-1, by removing the cap at 1.8%. The objective of such a measure is to prevent the price of a packet from becoming relatively cheaper compared to other everyday consumer products.

Then, the PLFSS proposes to the deputies to continue the tax catch-up of rolling tobacco on manufactured cigarettes, started several years ago. Indeed, a strong price differential between tobacco products tends to lead to consumption deferrals, which are detrimental to public health.

Finally, the PLFSS provides for the creation of a specific tax category for heated tobacco, based on unit taxation, in accordance with the recommendations of the WHO, as well as those involved in the fight against smoking, such as the National Committee against Smoking (CNCT), the Alliance against Tobacco (ACT), or the European coalition of NGOs Smoke Free Partnership (SFP). As it stands, the measure would lead to a significant increase in taxation for these new tobacco products.

Amendments to abandon tax increases rejected in Commission

During the examination of the PLFSS in the Social Affairs Committee, several amendments were tabled with the aim of abandoning the indexation of tobacco taxation on real inflation levels, and replacing the taxation of heated tobacco with a unit tax. The amendments aimed at cancelling the next increases in tobacco taxes received an unfavourable opinion from Stéphanie Rist, General Rapporteur at the Commission, by virtue of public health imperatives. As a result, these amendments were rejected by a majority of deputies of the Social Affairs Committee.

Heated tobacco: the tobacco industry maintains pressure on the National Assembly

Other amendments, notably those put forward by MP Charles de Courson, were tabled with the aim of replacing the unit tax on heated tobacco with a weight tax. In fact, the adoption of a weight tax would lead to a reduction in the tax burden on this new product, which would then become significantly more profitable for manufacturers. In a tax avoidance strategy, cigarette manufacturers would simply have to reduce the weight of heated tobacco.

MP Charles de Courson, who has proposed similar amendments in the past, has a long-standing relationship with the manufacturer Philip Morris, to date the only player marketing heated tobacco in France. In 2014, the Journal du Dimanche revealed that the MP had introduced an amendment drafted by Philip Morris, allowing a change in the structure of cigarette taxes that would give a competitive advantage to the Marlboro brand, marketed by PMI. The measure introduced by the MP resulted in a loss of revenue of around 120 million euros for the public authorities.[1]The amendments tabled in Committee relating to heated tobacco have been withdrawn by their authors, and should be reworked before being proposed again in plenary session.

Tax increases, through their proven effectiveness on consumption, are a central tool in the objective of achieving a first tobacco-free generation by 2032.

FT

[1] The Sunday Journal, Two MPs smoked by Philip Morris, 10/16/2014, (accessed 10/18/2022)