Excise duties on cigarettes in Italy will increase from 1st January, while those on heated tobacco and e-liquids will not rise at the rate previously laid out, under the new Italian government’s 2023 Budget Bill.
The newly formed right-wing coalition government introduced the budget bill in late November. Its approval by Parliament is expected before the end of the year.
Italy’s General State Accounting Office, which monitors public spending and funding, has also approved the draft text, which outlines the proposed new taxation system.
According to experts, the text should not be subject to significant modifications. However, there is still a chance that some details may be changed again.
The terms for tobacco products aim to harmonise the Italian tax system with European Council Directive 2011/64 on the structure and rates of excise duty applied to manufactured tobacco.
The draft budget halts a previously planned progressive increase in excise duty on e-liquids.
While the previous administration aimed to increase tax on nicotine-containing e-liquids to 25% of the excise duty on the equivalent quantity of cigarettes – and to 20% of that equivalent for those without nicotine – the present government has lowered those percentages to 15% and 10%, maintaining the present level of taxation.
Nicotine-containing e-liquids will be therefore taxed at roughly €1.20-€1.30 per 10 ml and those without nicotine at about €0.70-€0.80 per 10 ml.
Although the measure does not return the excise on e-liquids to levels established before 2020, it will stop the progressive increase set in motion in December 2020.
The government calculated the tax on vaping products by looking at historical data and assuming sales of 146m ml of nicotine-containing and 34m ml of nicotine-free e-liquids. The tax makes no distinction between as refillable, capsule or disposable systems.
The overall tax revenue on e-liquid is forecast to be €19.3m below previous expectations in 2023 (€15.76m in excise duty and €3.47m from VAT).
Putting pressure on combustibles
The loss in tax revenue will likely be balanced by the increase in excise on combustible cigarettes.
Assuming the budget goes through in its current form, those duties will go up in order to raise cigarette prices based on a fixed specific amount per unit of product – currently set to be €36 per 1,000 cigarettes in 2023, €36.50 per 1,000 in 2024, and €37 per 1,000 in 2025. This would increase the price of a packet of 20 cigarettes by €0.72 in 2023, €0.73 in 2024, and €0.74 in 2025.
Use of traditional cigarettes has significantly contracted in recent years, according to the Ministry of Economy and Finance’s Tax Revenue Bulletin and the government hopes further financial pressure will continue that trend.
Under current law, tax on heated tobacco was supposed to be raised incrementally to 40% of the duty on the equivalent quantity of cigarettes in 2023. The 2023 draft budget would slow the increase, setting the excise rate at 36.5% from January, 38% in 2024, 39.5% in 2025 and 41% in 2026.
According to the government’s forecast, the reduced percentage of heated tobacco excises will decrease tax revenue by €85.24m in 2023, €58.81m in 2024, and €17.23m in 2025, but lead to an increase of €34.45m in 2026.
– Dario Sabaghi ECigIntelligence contributing writer