Background: In Italy the introduction of an excise tax on heated tobacco products coincides with that of the current levy on electronic cigarettes. Legislative Decree 188 (Provisions on taxation of tobacco products, their substitutes, as well as of matches), which entered into force on 24 December 2014, introduced amendments to Legislative Decree no. 504, dated 26 October 1995, as amended. Among these was the inclusion of “inhalation tobacco without combustion” among the tobacco products subject to excise tax.
Rate of excise: The amended provisions, in particular article 39-terdecies, paragraph 3, states that inhalation tobacco without combustion shall be subject to an excise tax set at 50% of the excise burden on an equivalent quantity of cigarettes with reference to the weighted average price of one kilogram (i.e. 1000 sticks) of conventional cigarettes.
The precise equivalence is determined according to technical procedures identified by the Customs and Monopoly Agency (AAMS) based on a comparison of the average time of consumption (ATC) of 5 brands of cigarettes and the ATC of the inhalation tobacco product in question. The outcome of the test for the ATC of an inhalation tobacco product without combustion and the ATC of nicotine containing liquid used in electronic cigarettes differs in one fundamental way.
The rate of excise tax for nicotine containing liquid derived from the comparison with the ATCs of 5 sample conventional cigarettes is applied equally to all brands and variants of liquids sold in Italy. In the case of inhalation tobacco products without combustion, tests of the average time of consumption must be conducted with a particular product variant and the resulting excise tax rate is applied only to that product variant. To the best of our knowledge, thus far only two variants of PMI’s iQOS product, Marlboro Essence and Marlboro Balance have been submitted to AAMS for such testing. The resulting excise tax rates per pack of 20 sticks are €1.2016 and €1.2032, respectively.