The EU is preparing for the after “Minimum price”

If, on one hand, the European Union has established that the minimum price is illegal, supporting Yesmoke's thesis, on the other, the EU itself is undertaking action that will cancel out completely the effects of its abolition.

The European Union is a question mark. Why was it formed? What could be the purposes of a union of countries whose president was Romano Prodi, the man who condoned Philip Morris not only tens of billions of euro in tax evasion, but also pardoned all the criminal activities it had been carrying on for decades?

Who is there behind the European Union? One thing seems certain: the “European Home” is totally enslaved by some big corporations, and among them, there are the multinational tobacco manufacturers.

On the 16th of July of this year, László Kovács, European Commissioner for Taxation and the Customs Union, in a press conference on “Changes in Tobacco Taxation,” presented a tax proposal that is absurd; it would give the single countries a totally free hand to determine their minimum excise duties. It appears aimed at favoring the interests of the tobacco multinationals.

The Minimum Excise

The minimum excise is a system of taxation that penalizes sales at competitive prices. Today it is calculated based on the price of the most widely sold cigarettes; this price today in Italy is 3.60 euro. This is the cost of brands like Diana, MS and Winston, all sold for 3 euro 60 a pack.

Increases in the minimum excise duty have led to increases of the minimum price, raising the prices of the economical cigarettes. Today the minimum excise has a limit; it cannot exceed the value of the excise on the most sold cigarettes.

Kovács’s new proposal plans for a minimum excise without any limits, that is, at the discretion of the single States.

A Lack of Logic and Practical Sense

A State that applied the minimum price, being obliged to remove it, will now be able to obtain the same result as before by imposing an excise level higher than that of the most widely sold cigarettes. If with the minimum price, the multinational tobacco manufacturers reaped tremendous benefits, having no limits on the minimum excise would allow some States to create a situation even worse than before.

It is obvious that a country of brown-nosers like Italy, which has always opposed the abolition of the minimum price, if it has the chance to freely determine the minimum excise, will want to continue the previous situation promoting the interests of the tobacco multinationals.

And what is interesting is that the Italian brown-nosers will find themselves with even more power in this direction, and this time it will be impossible for Yesmoke to challenge them in court, as they will be backed by a law of the European Union.

It is elementary that a Union member like Italy, that has always opposed the directives of the European Community on the minimum price, should not be given the opportunity to recreate the same effects that the minimum price allowed.

László Kovács’s proposal at first sight appears superficial, it is marked by a lack of logic and practical sense that would be deplorable even for a middle school student.

But today this way of thinking has become standard for journalists, economists and politicians. We find ourselves facing a shameless attempt to wipe out the beneficial effects of the abolition of the minimum price… and no one seems to notice it!

To develop a proposal like this, Laszlo Kovacs turned to a prestigious agency, KPMG that prepared a study 514 pages long; we don’t want to imagine how much this cost European tax payers.

Yesmoke’s Letter to László Kovács

To: The European Commission
Office of Mr. László Kovács
Rue de la Loi 200
B-1049 Bruxelles

Dear Mr. Kovàcs,

I am writing to you in reference to the changes to taxation legislation regarding tobacco, which you presented in the press conference of last July 16th. As administrator of the Yesmoke S.p.A., I wish to express our dismay on the contents of this proposal and on the way it was prepared.

Our company, the only one in all the European Community that has taken legal action against the minimum price, was not consulted on the changes to the legislation; those taking part in the consultations were only those companies that had no interest in opposing the minimum price. In fact, this proposal, as we understand it, offers considerable benefits to these companies.

The new rule for determining the MPPC in principle is fair. However, in those countries where the minimum price is in force, it will generate values higher than those that would exist if there had not been the minimum price, values that after its abolition, the market will no longer be able to correct. According to your planning, the new legislation will be adopted by the end of 2009, that is, before the conclusion of the legal proceedings against those countries that introduced the minimum price. The application of the new legislation in these countries, we believe, should take place in a period following, so that the market can recreate a price situation not influenced by the minimum price.

A member of the European Community, like Italy, that has opposed the Union directives regarding the minimum price should not be given the chance to recreate the same situation generated by the minimum price. The possibility to introduce a minimum excise without any limitations, in fact, will enable countries to recreate the same or even worse conditions than the minimum price has had. And what makes this new situation worse: there will be no possibility to oppose it through legal action.

We are asking that you please reflect on our elementary observations and consider revised or new legislation that will effectively lead to the changes needed.


Yesmoke Tobacco S.p.A.

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