Tabaksteuergesetz Steuerrecht Göttingen

IQOS & Glo — Can heated tobacco be taxed additionally? Dispute over the compatibility of the Tobacco Tax Act with EU law

Manu­fac­tu­rers of smoke­less ciga­rette alter­na­tives have little to laugh about these days. After the German Bundestag decided in 2021 to amend the German Tobacco Tax Act and tax tobacco heaters and elec­tronic ciga­rettes almost as much as conven­tional ciga­rettes, the Euro­pean Court of Justice recently ruled in its judge­ment of 14 March 2024 (C 336/22) that such a tax increase is compa­tible with EU law.

But what is tobacco tax actually? And what does the Euro­pean Court of Justice have to do with it?

Tobacco tax has been levied in Germany on tobacco products of all kinds, such as ciga­rettes, cigars and pipe tobacco, since 1906.

As an excise duty, tobacco tax is a so-called indi­rect tax. In the case of excise duty, taxes are levied on the consump­tion or use of certain goods or the utili­sa­tion of services. Apart from tobacco, alcohol and coffee are also subject to excise duty. Anyone who purchases these goods ther­e­fore pays excise duty on the corre­spon­ding products.

Tobacco tax is also a so-called special excise duty, which is regu­lated by federal law, with legis­la­tive compe­tence falling to the federal govern­ment. The legal basis for tobacco tax is the German Tobacco Tax Act (TabStG).

Tobacco tax has been harmo­nised in the Euro­pean Union since 1 January 1993. The German Tobacco Tax Act is ther­e­fore now largely based on common EU direc­tives. For this reason, the Euro­pean Court of Justice has juris­dic­tion when it comes to ques­tions rela­ting to German tobacco tax.

Until the end of 2021, tobacco strands imported into tobacco heaters were only taxed at the tax rate for pipe tobacco.

In 2021, however, the Bundestag decided to tax e‑cigarettes and tobacco heaters at a higher rate from 2022 in addi­tion to conven­tional ciga­rettes, cigars and ciga­rillos.

The law subjects nico­tine-contai­ning subs­tances used in e‑cigarettes to tobacco tax for the first time — previously, only VAT applied to them.

An addi­tional tax was intro­duced for heated tobacco. § Section 2 (1) no. 5 TabStG now stipu­lates that an excise duty and a new addi­tional tax must now be paid for heated tobacco.

f6 Ciga­ret­ten­fa­brik GmbH Co. KG filed a lawsuit against the main customs office in Braun­schweig and brought an action before the Düssel­dorf Fiscal Court because it considered the addi­tional tax to be unlawful. In its opinion, the new German addi­tional tax was not compa­tible with EU law, in parti­cular not with Art. 1 Para. 2 of the Excise Duty Direc­tive (Council Direc­tive 2008/118/EC of 16 December 2008). Accor­ding to this regu­la­tion, addi­tional taxes can be levied on excise goods for special purposes.

The tax court was unable to answer the disputed legal ques­tions with certainty in the tax court procee­dings and made use of the option to suspend the court procee­dings in accordance with Art. 267 of the Treaty on the Func­tio­ning of the Euro­pean Union (TFEU) and refer them to the Euro­pean Court of Justice.

The Euro­pean Court of Justice found that the requi­re­ments of the EU Direc­tive were met by the provi­sions of the national tobacco tax law.

On the one hand, heated tobacco falls under the term “smoking tobacco” within the meaning of EU law and is ther­e­fore subject to excise duty in accordance with Art. 1 para. 2 of the EU Direc­tive in ques­tion.

On the other hand, a special purpose is fulfilled which justi­fies the impo­si­tion of an addi­tional tax. The addi­tional tax was intended to bring the taxa­tion of heated tobacco closer to the taxa­tion of ciga­rettes — with the aim of discou­ra­ging nico­tine addicts from repla­cing ciga­rettes with tobacco, which is also harmful to health.

The compe­tent tax court must now deal with the complaint again, taking into account the case law of the Euro­pean Court of Justice, and make a decision on the matter.

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