§ Mr. Wrigglesworth
asked the Chancellor of the Exchequer what progress has been made in the EEC discussions of tobacco tax harmonisation; and if he will make a statement.
§ Mr. Robert Sheldon
At its meeting on 19th December, the EEC Council of Ministers reached agreement on a directive establishing a second stage in cigarette tax harmonisation, which will run from 1st July 1978 to 31st December 1980. During this stage, subject to a temporary derogation for the Republic of Ireland, the specific element in taxation of cigarettes will have to fall between 5 per cent. and 55 per cent. of total taxation of cigarettes, including VAT, the remainder of the duty being raised on an ad valorem basis. This provision will not necessitate any change in the duties on cigarettes chargeable in the United Kingdom from 1st January 1978 under Section 3 of the Finance Act 1977.
In agreeing to this directive the United Kingdom has stated that in future stages of harmonisation it would not expect to have to consider any alteration in the maximum specific limit of 55 per cent., but would expect any further movement to be in the minimum.
In connection with this directive, the United Kingdom has successfully negotiated a provision under which it will be permitted for 2½ years from the start of the second stage to impose a supplementary duty on cigarettes with a tar yield of 20 mgs or more. The supplementary duty would be designed to discourage the consumption of those cigarettes. The amount of the supplementary duty would be limited to an amount not exceeding 20 per cent. of the duty which would otherwise have been chargeable. This supplementary duty would require 172W Finance Bill legislation before it could be introduced. In the meanwhile, I have authorised Customs and Excise to consult with the tobacco industry on the machinery of assessment and collection.