After Peterson of Dublin closed its doors in 2018, another small pipe tobacco company ceases manufacturing. Planta Tobacco Company from Berlin closed its doors due to the significant costs resulting from the EU Tobacco Products Directive adopted in 2014 and the subsequent EU regulations.

When proposing the EU Tobacco Products Directive, the European Commission admitted that smaller and mid-sized companies would be impacted much more than large multinational cigarette manufacturers, but from its point of view that was a price worth paying. However, few real impacts were calculated and, in the cases, where they were, they hugely underestimated the real compliance costs.

The European Commission and the other EU institutions involved could have simply avoided forcing small tobacco companies out of business, if better legislation had been developed. The adopted regulations were mainly written having factory-made cigarettes in mind, with other niche tobacco products being an afterthought. Differentiation based on product, consumers, manufacturing or companies was simply disregarded.

Pipe tobacco is a niche traditional tobacco product representing less than a one percent of the total tobacco market, enjoyed on occasion by mature adults as a relaxing pleasure, and manufactured, up till now, by several small family-owned companies.

Pipe tobacco is a tobacco product which is not smuggled. Nonetheless, the overly expensive EU track and trace system, aimed at curtailing smuggling of cigarettes, will also apply to pipe tobacco meaning further costs for those small producers.

The introduction of large health warnings meant packaging and machine changes. Again, pipe tobacco was simply disregarded when regulators decided the size of health warnings, designed with cigarette packaging in mind.

Faced with the need to make further machine changes to comply with the new track and trace system and alarmed by the threat of future packaging changes – publicly advocated by the Commission – after the adoption of the law in 2014, small companies simply cannot absorb the costs of continuous disruptions to their manufacturing.

ESTA’s Secretary General Peter van der Mark said: “The EU has failed time and time again to make legislation that does not unduly impact small and medium sized companies. We hope that the Commission’s proposed SME Envoy, announced by the incoming Commission, will be able to ensure that legislation from the Commission does not threaten the viability of European SMEs.”

The Belgium government reported yesterday an increase of 123,8 million euros of excise receipts from tobacco, which amount to 2,373 billion euros in 2018. This increase is partly due to higher prices in neighbouring countries, such as France where cigarettes packs increased by around 1 euro.

This increase of government revenues follows difficult years for the Belgium government, which recently suffered from severe fiscal shortfalls due to poorly-conceived tax policy on fine-cut tobacco. As demonstrated in the 2018 London Economics Study, Belgium has implemented sharp increases in tobacco excise duties (up to 17-19% in 2016-2017) since 2013, which heavily impacted domestic duty-paid sales and significantly reduced taxation receipts. In 2016 excise duties were increased to raise revenues, but there was a fiscal shortfall of almost 5% (€3.087 billion instead of the expected €3.238 billion). By 2017, tobacco duties had further declined to €3.004 billion, thereby exacerbating the fiscal shortfall.

ESTA Secretary General Peter van der Mark said: “Belgium’s example illustrates the sensitivity of the demand for fine-cut tobacco to changes in excise duties (and price), but also the importance of taking into account the speed of changes in consumer behaviour in response to excise changes; the buffer function of fine-cut tobacco; and the long run consequences on public finances of sudden and ill-conceived policy changes.”