Hand-rolled tobacco should be taxed in the same way as manufactured cigarettes
Comments on the Commission report COM (95) 285 final on the approximation of taxes on manufactured tobacco other than cigarettes
January 1996
Taxation systems should ensure that all tobacco products become less affordable. In general, most efforts are concentrated on the taxation of cigarettes. It is important, however, to ensure that a cheap substitute does not remain for the product being taxed. There is indeed a strong relation between the affordability of cigarettes and of roll-your-own tobacco and the consumption of these products.
In Southern European countries, such as Greece, Italy, Portugal and Spain, the price is relatively cheap and the market for rolling tobacco is very small. On the other hand, in countries where cigarettes are taxed at approximately the same levels, such as the UK and Ireland, the market share of the latter remains low. However, in Belgium, Denmark and the Netherlands, the combination of high cigarette prices and low taxes on rolling tobacco have resulted in a high level of consumption of roll-your-own cigarettes. Excise duties represent 57 % of the retail selling price of cigarettes and only 30 % of the retail selling price of rolling tobacco (1).
So far the lower rate has produced a widening gap between the sale price of hand-rolling tobacco and manufactured cigarettes of the same brand name.
For instance, RJ Reynolds has launched hand-rolled Camel in several EU countries . The selling price varies substantially from one country to another :
Selling price in ECUs of Camel cigarettes and hand-rolling tobacco (January 1996)
Country 1,000 cigarettes 1 KG tobacco Belgium 138 54 Germany 138 68 Netherlands 121 56 UK 174 172
From a health point of view, it is unacceptable that the same Camel tobacco is taxed lower as RYO tobacco than as manufactured tobacco. This is not the case in the UK where the price of 1,000 Camel cigarettes is 174 ECU and the price of 1 Kg Camel tobacco 172 ECU.
As a first stage, it should be attempted to bring the level of taxation for rolling tobacco to the same level as the present minimum level of taxation for cigarettes.
Beside the low price, hand-rolling tobacco is causing some other important problems.
* The tar yield of manufactured cigarettes is regulated by Community directives but not the tar yield of hand-rolled tobacco. The directive states that the tar content of cigarettes should not exceed 15 mg per cigarettes as of 31 December 1992.
Two studies have shown that the tar yield of hand-rolled tobacco is much higher than the 15 mg per cigarette.
1) A report in the Netherlands (June 1993) has indicated that the tar content of RYO tobacco among the 42 most popular brands in 1992 varied between 22.7 and 30.5 mg per cigarette (2).
2) A report in Norway (September 1994) has indicated the tar content of six of the most popular brands of RYO tobacco varied between 31.6 and 35.9 mg per cigarette (3).
* The nicotine yield is not regulated by Community directives, but RYO cigarettes have much higher nicotine yields than manufactured cigarettes (2,3). As a result, RYO tobacco smokers seem to have a deeper addiction to tobacco and are less likely to try to quit.
When these smokers try to quit, they are less likely to succeed. For instance, a study in Norway in 1993 showed that 32 % of those smoking manufactured cigarettes tried to quit smoking during the previous 12 months, whereas only 18 % of those smoking handrolled cigarettes had tried to quit (3).
* Most smokers of hand-rolled tobacco do not use a filter, which means that the smoker inhales large doses of dangerous substances such as tar, nicotine and carbon monoxide.
The actual Commission proposals are inconsistent, in contradiction with EU health policy and the result of unfair industry lobbying
According to the Commission report, there is a problem of smuggling of hand-rolling tobacco between the high price countries such as Ireland and the United-Kingdom and the low price countries such as the Belgium and the Netherlands.
According to the Commission, "any proposal to address this situation solely by adjustment of the minimum rate would require so large an increase as to be unrealistic" and "At face value, therefore, it would appear that it is essentially a matter for high taxing Member States to tackle, through reducing their national rates and/or improved control measures". In other words, no proposals to increase the price of hand-rolled tobacco in low price countries but a suggestion to decrease the price in high price countries.
How important is the smuggling problem ?
The Commission is not very consistent in describing the smuggling problem of hand -rolling tobacco. It is known that the market of hand-rolling tobacco is limited in the UK (around 3,000 to 4,000 tons). According to the Commission, illegal sales in the UK have been estimated to account for around 5 % of the total sales of hand-rolling tobacco" (p 18, section 4.6). 5 % of a small market does not seem to be a major problem. Nonetheless, on the same page (p 18, section 4.8) the Commission observes "to the extent that this situation is giving rise to considerable fraud", which means that the smuggling problem is again a major problem according to the Commission. However, looking at the sales figures of RYO tobacco in Belgium, it is difficult to conclude that smuggling of hand-rolled tobacco is a major problem. Sales figures of hand-rolling tobacco in Belgium were 5,181 tons in 1992, 5,129 tons in 1993 and 5,616 tons in 1994, which is only an increase of 435 tons (or 8 %) in the period 1992-1994.
The Commission proposals are inconsistent
The Commission report presents us with an outright contradiction, in regard to hand-rolling tobacco :
- on page 3, the following statement appears in the summary describing chapter 4 (other than tobacco products) : "health arguments would support increased taxation of hand-rolling tobacco".
- on page 18, the report makes no more proposals to increase the minimum tax level, but suggests to decrease the price in some countries.
The Commission proposals are in contradiction with the EU health policy
More than 500,000 citizens die prematurely every year from a variety of tobacco-related diseases. Following the ratification of the Maastricht Treaty and its article 129 "health protection requirements shall form a consistent part of the Community's other policies". Hand-rolled cigarettes are taxed at a low level in the EU while they are as dangerous to health as manufactured cigarettes, or even more of an increased health risk, because most hand-rolled cigarettes do not have filters and hand-rolling tobacco usually has a higher tar content than manufactured cigarettes.
The health arguments are inescapable. Perversely, however, the report concludes that the problem of differential rates is 'essentially a matter for high taxing Member States to tackle, through reducing their national rates and/or improved control measures' (Sec 4.9). This is precisely the reverse of what is needed, for the only effect would be an overall reduction in selling prices and an increase in tobacco consumption.
The real solution is to increase taxes on hand-rolled tobacco to at least the same level as, or higher than, taxes on manufactured cigarettes.
The Commission proposals are the result of unfair tobacco industry lobbying
In an article of the tobacco trade journal "Tobacco International" of December 1995, the history of the Commission proposals and of the industry lobbying is described in detail (5). Initially the Commission proposed to lift minimum excise levels of RYO tobacco from 30 % of the retail price to 45 % of the retail price. After intensive lobbying by the RYO industry, the Commission withdrew its proposals in July 1995, offering instead an Excise Conference for interested parties to be held in Lisbon. At this conference 42 representatives of the tobacco industry and only one of the health organisations were present. Despite several requests, health organisations were never informed by the Commission services of their initial proposals . The Tobacco International describes these events as a clear victory for the industry "Lobbying by national tobacco industries, muddled thinking by the bureaucrats in Brussels, and a weak college of Commissioners have all combined to consign to the dustbin the latest draft proposals by the EU commission to raise minimum excise levels on cigarettes and roll-your-own (RYO) smoking tobacco (5)" and "While the Commission was in the process of formulating its proposals , the tobacco industry could, and did, intervene this time successfully (5)".
Conclusion
Hand-rolled cigarettes are as dangerous to health as manufactured cigarettes. There is even some evidence that they are more damaging to health, as they contain more tar and nicotine and smokers use less filters. Unless taxes, and thus prices, are brought into line, there is a real incentive for smokers to switch to hand-rolling cigarettes rather than cut down or quit (4).
In all European countries except Ireland and the UK, hand-rolling tobacco is taxed at a lower level and in some cases at a much lower level than manufactured cigarettes. A major effort should be made to increase taxes on RYO tobacco to at least the same level as, or higher than those on manufactured cigarettes (4).
References
(1) BASP, Taxes on tobacco products : a health issue, Brussels, December 1992.
(2) De Kok, A.; Besamusca, E.W.; Vreeker, C.P.; Lagrand, E., Shag : een teer onderwerp, een onderzoek naar de opbrengst aan teer en nicotine in de rook van 42 in Nederland verkochte shagmerken, Inspectie gezondheidsbescherming, Alkmaar, juni 1993.
(3) Hauknes, A., Analysis of hazardous substances in rolling tobaccos, National Council on Tobacco and Health, Oslo, September 1994.
(4) Health Education Authority and UICC, Tobacco taxes in the European Union : How to make them work for health ?, London, December 1994.
(5) Garran, R., Setback for RYO : EU's tobacco tax harmonisation, Tobacco International, December 1995, pp 43-45.
Annex 1 : Tar and nicotine yield in hand-rolled tobacco in the Netherlands
Brand Nicotine (mg/cig.) Tar (mg/cig.)
Albert Hein tobacco 2.10 27..5
halfzwaar
Albert Hein tobacco mild 1.69 25.0
Albert Hein tobacco 3.65 30.4
zwaar
Arbo light 1.46 27.2
Bison halfzwaar 2.81 28.2
Brendaris zwaar 4.02 28.8
Caballero mild 2.09 27.5
Dragon special zwaar 3.38 28.6
Drum excellent halfzwaar 2.58 27.6
Drum mild 1.68 23.9
Drum select halfzwaar 2.56 26.7
Gauloises sig. tab. 2.57 30.5
Gruno american priv. 2.49 27.8
tab.
Gruno halfzwaar 2.58 30.2
H en R american 1.51 25.9
H en R halfzwaar 2.46 28.9
H en R licht 1.54 30.1
H en R zwaar 3.84 27.3
Jakobs export halfzwaar 2.19 25.6
Jakobs export mild 1.59 23.2
american
Jakobs select zwaar 3.11 27.5
Javaanse jongens de luxe 3.35 29.6
zwaar
Javaanse jongens mild 1.64 25.1
Javaanse jongens 3/4 2.42 27.5
zwaar
Kentuck excellent zwaar 3.86 29.1
Pall Mall export sig. 2.54 29.3
tabak
Reinaert halfzwaar 2.07 27.3
Rider mild halfzwaar 2.71 29.7
Samson halfzwaar 2.43 28.9
Schwarzer krauser 2.87 28.0
halfzwaar
Sterling mild virginia 2.46 28.4
Texas halfzwaar 2.33 26.3
Texas mild 2.02 27.1
Texas zwaar 3.33 28.4
Twin special halfzwaar 2.65 30.2
van Nelle export zwaar 3.83 28.1
van Nelle halfzwaar 2.63 28.7
van Nelle mild 1.42 23.4
van Nelle special 4.14 29.4
quality zwaar
Winner excellent (licht) 1.83 25.2
Winner mild 1.51 22.7
Zilver excellent 1.50 24.4
virginia (licht)
Source : Inspectie Gezondheidsbescherming, Alkmaar, 1993.
Annex 2 : Tar and nicotine yield in hand-rolled and manufactured cigarettes in Norway (1994)
Brand Type Nicotine Tar
Petterse'3 Mixed Handrolled 2.67 34.21
Petterse'3 Light Handrolled 1.99 32.68
Petterse'3 Extra Handrolled 1.92 31.56
light
Eventyr 3 Mixed Handrolled 2.68 35.93
Eventyr 3 Light Hanrolled 2.48 35.49
Gull Snitt Handrolled 3.02 34.67
Camel Manufactured 1.20 18.00
Camel Filter Manufactured 1.30 16.00
w/filter
Camel Lights Manufactured 0.90 11.00
w/filter
Marlboro Manufactured 1.10 16.00
w/filter
Marlboro Lights Manufactured 0.80 11.00
w/filter
Prince Manufactured 1.50 18.00
w/filter
Prince Lights Manufactured 1.20 14.00
w/filter
Prince Extra Manufactured 1.00 11.0
Lights w/filter
Source : National Council on Tobacco and Health, Norway, 1994.