Of the electronic cigarettes, or e-cigs, if you prefer, everything has been written in recent months: first the doubts about their effective non-toxicity, then a market that - regardless of the dispute on the effects on health - has physiologically slowed down after the boom of 2013, finally, the question of taxation, with an appeal to the Tar which effectively prevented any tax revenue to the State for the whole of 2014.
In recent years, the electronic cigarette market in Italy has in fact seen a succession of laws and regulations that have created confusion and lack of clarity both among consumers and among e-cigs traders. Despite this, Italy, at the point of arrival of this troubled regulatory process, ranks among the pioneering countries as regards industry regulationespecially with regards to taxation. Let's see how and why.
In August 2013, Parliament had introduced, through the so-called "decree of doing", a consumption tax of 58,5% of the sale price both on devices, and related spare parts, and on liquids, starting from 1 January 2014. However, as mentioned, the tax was never collected by the State as the producers of ecigs did not consider this taxation to be fair and challenged the measure before the Tar of Lazio requesting the suspension of the tax. With an order, later confirmed by the Council of State, the Lazio Regional Administrative Court suspended the 58,5% consumption tax, referring the documents to the Constitutional Court.
The outcome of the dispute, still uncertain, was therefore postponed. This means manufacturers or traders of ecigs during 2014 they did not pay anything to the state coffers. However, after the boom of 2013, the sector underwent a natural decrease from 2013 to 2014, not due to state fiscal interventions, which were never reflected in a change in the consumer prices of these products.
Despite this, the various associations of e-cigs producers, from ANAFE (National Association of Electronic Smoke, which belongs to Confindustria) a FIESEL extension e ASSIFEL (which belong to Confesercenti) conducted a very aggressive media campaign throughout 2014, negatively criticizing the tax interventions of the State, which they said had "brought the sector to its knees". To remedy this situation, using the Tobacco Tax Reform Legislative Decree (December 23, 2014) as a tool, the government changed the tax regime for these products to adapt the legislation to the reference market and start collecting those budgeted 117 million euros present in the 2014 Budget Law.
The draft decree of the tobacco reform, already circulated in July and discussed in the parliamentary commissions in the following months, had however still infuriated the producers of e-cigs, who had calculated the tax intervention with consequences on the final prices equal to +480% and disastrous employment impacts. But is it really so? In reality, the Tobacco Tax Reform Decree, published in the Gazette on 23 December 2014, established for innovative tobacco products and electronic cigarettes, the application of a tax referring to that of cigarettes, but in significantly reduced extent (50% less), "in consideration of their lesser harmfulness".
Italy therefore, contrary to what one might think, has established a clear and transparent tax system. In fact, our country has envisaged a detailed procedure for measuring the equivalence of e-cigs and innovative tobacco products (for example, smokeless inhalation tobacco) by comparing them to the experience of cigarettes. But why tax these products when, according to the producers, it would help to "put an end to the whole industry"? According to the explanatory report attached to the decree, the total absence of a tax on these "alternative" products would have generated a distortion of competition compared to traditional tobacco products and, above all, huge tax damages. The solution elaborated by the Government and accepted by the Parliament does not penalize a sector, on the contrary it protects the interests of tax revenues and, by granting a reduced taxation of 50% compared to traditional tobaccos, recognizes the potential to reduce the impact on health of these products , making this new sector sustainable and regulated.
Despite this, the producers of e-cigs have recently challenged the decree again before the Lazio Regional Administrative Court, considering the taxation unfair and asking once again for the suspension of the tax. The Customs and Monopolies Agency has in fact established, by means of a decree, the equivalence of the duration of consumption of these products with respect to traditional cigarettes. The equivalence of e-cigs, established was determined on the basis of the average consumption time required compared to that of traditional cigarettes and the measurements were open to the public and conducted in a transparent manner: the equivalence obtained was equal to 1 ml = 5,6 cigarettes, therefore lThe calculated rate was equal to 0,37 euro/ml. For the new category of “smokeless inhalation tobaccos”, the equivalence of the duration of consumption of the product with respect to traditional cigarettes was determined, however, according to the same calculations, in 1 unit of product = 0,9 conventional cigarettes, consequently the established rate was approximately 60 euros per 1000 pieces.
The hearing was held on 4 March and the judge did not grant the precautionary regime of suspension of the tax. The judgment on the merits of the dispute is now awaited, scheduled for early July.
But the battle did not stop on a legal level, also ending up on the benches of Parliament. Recently the Hon. Filippo Busin (Lega Nord) presented a parliamentary question, contesting the procedures used by the AAMS to establish the level of taxation of e-cigs, arguing that the tax applied to electronic cigarettes is “excessive and miscalculated” and far more penalizing than that applied to smokeless inhalation tobacco products. The MEF, answering the hon. Busin, recalled that these are very different products, especially from the point of view of the methods of consumption. For example, e-cigs do not consume themselves like cigarettes if not inhaled. Therefore, in order not to invalidate the implementation of the tax, the Monopolies have foreseen calculation methodologies that take into consideration only the aspiration times "eliminating" instead those of the self-consumption of the cigarettes used as a term of comparison.
Meanwhile, also at the European level the best regulation of these products from a fiscal point of view is being discussed. The only two countries that have already implemented such legislation are Italy and Portugal. Since 1 January 2015, a tax of 0,60 euro/ml has been applied in Portugal (only if the liquid contains nicotine): much higher than the Italian one and applied without any measurement. In other countries there is still little clarity on how to deal with these products for tax purposes and there are still many differences between EU countries. Who knows if for once Europe will take Italy's example which, in this case, brought legislative clarity to a sector by now characterized by normative schizophrenia.
Perhaps it is no coincidence that the multinational Imperial Tobacco, has chosen Italy as the country to market its electronic cigarettes: the preferential taxation could in fact have convinced the British multinational to launch its products in Italy. The tax predictability defined for new products has also convinced the other multinational based in the United Kingdom (British American Tobacco) to announce, by the end of 2015, its entry into the segment of innovative tobacco products on the Italian market. Beyond Philip Morris, which has made a choice of field in building in Italy, Bologna, its first world factory of "combustionless tobacco" which today produces for the first world commercial tests in the city of Milan and Nagoya, Japan.
