EU court ruling could cut cigarette prices

Cigarette prices in Ireland could fall if, as expected, the European Commission wins its challenge against the Irish government this week. The commission has questioned Ireland’s right to set minimum prices for cigarettes and other tobacco products.

The EU’s 1995 Manufactured Tobacco Tax Directive permits importers and manufacturers of tobacco products to set maximum prices for their products. But Ireland’s 1986 Tobacco Products (Control of Advertising, Sponsorship and Sales Promotion) (No 2)Regulations prohibit the sale of cigarettes at less than 3 per cent below the average price.

The government says minimum prices are necessary to protect public health by ensuring that tobacco products are not too cheap. It claims that the directive refers only to the setting of maximum prices, not minimum prices.

But the commission is seeking a declaration that Ireland has breached its obligations under the 1995 directive. Similar cases are being pursued against France and Austria.

Last October, Juliane Kokott, the Advocate General at the European Court of Justice, found against Ireland and, while her opinion is not binding, the Advocate General’s views are generally followed.

Kokott argued that setting a minimum price interfered with manufacturers’ freedom to set a maximum price, which could not be lower than the limit set by the state. She said EU states could increase the excise duty on tobacco products, and this was an appropriate way to protect public health. The Court of Justice will deliver its judgment on Thursday.

The Revenue Commissioners collected an estimated €1.22 billion in excise duty from tobacco products last year, up from €1.17 billion in 2008.

In a separate development, customs officers last Tuesday seized cigarettes worth almost €12 million from business premises in Dundalk. The 28 million cigarettes were hidden in bulk pallets of timber. The operation involved the Criminal Assets Bureau, the Naval Service and Air Corps and customs officers and police from both sides of the border.

A statement from the Irish Tobacco Manufacturers’ Advisory Committee said: ‘‘Non Irish duty-paid cigarettes cost this country €526 million last year. That is an unacceptable loss of government revenue during recessionary times. The expected loss to the exchequer for 2010 is set to reach €616million."