The changes resulting from the amendment of the Excise Tax Act are introduced in order to give a level playing field to both entrepreneurs operating in the traditional tobacco industry and substitution products industry.
On 1 February 2018 entered into force the Act amending the Act on Excise Tax 12 December 2017 (Journal of Laws of 2018, item 137), imposing an excise duty on two new species of excise goods, i.e. liquids for electronic cigarettes (e-liquides) and novel articles.
The rate of excise duty for cigarette liquid is to be 50 pennies (for each millilitre) and for innovative products – 141.29 PLN (for each kilogram) and 31.41% the weighted average retail selling price of smoking tobacco.
Thus Poland was among those countries of the European Union which, despite the lack of harmonisation of excise duties on the products concerned, decided to impose national excise duties in this respect.
The introduction of changes, in addition to the regulatory function, that is, allowing the government to control more closely the turnover of new categories of excise goods, both in terms of production, sales and distribution, has a fiscal dimension in particular, as the Ministry of Finance provides for revenue to the state budget for the new tax at the level of 75,000,000 PLN.
Annual transitional period
The Act provides for the application of general rules on excise duty. At the same time to the end 2018, on the basis of transitional arrangements, the zero rate shall apply instead of the excise duty rates provided for in the Act.
This is the result of a request from producers who managed to get the government to introduce an annual transitional period.
Taxation of excise duties of new products will therefore enter into force de facto 1 January 2019 Despite this, the Act already imposes new obligations on taxpayers, such as the need to report on production and import or to mark legalising the excise duties of liquids for electronic cigarettes or innovative products intended for sale in Poland after 31 December 2018 For 30 October 2018 manufacturers will be able to report preliminary estimates of the demand for legalising excise duties.
Furthermore, in both cases, excise duty exemptions are provided, for example in the case of imports of these products, imported in the passenger's personal luggage.
The legislator's intention is to treat the products concerned in the same way as traditional tobacco products, which means that they are subject to the obligation to banderoll attesting to their legal origin and to better control of the state over their production, movement and sale.
No environmental consultation
The views on the changes made are divided. The e-cigarette industry is disappointed, first of all, by the approach of the Ministry of Finance to the way in which the work was carried out on the bill, namely the lack of adequate market analyses, dialogue with the sector, as well as the failure to draw conclusions from the experience of other countries in this area. Others believe that the imposition of tax on e-cigarettes is a natural consequence of their qualification as tobacco products.
An interesting question is how the Ministry of Finance argued the need for these changes. In his opinion, the taxation of these products makes the purchase by smokers of innovative tobacco products cease to buy these traditional and thus deplete the state budget. Then the imposition of taxes on the new products of this patch hole.
According to the justification of the Ministry of Finance, ‘the use of non-taxable products by consumers is at the expense of consumption of traditional tobacco excise products. It was therefore necessary to develop legislative arrangements to ensure that substitution products were treated in a comparable manner to traditional tobacco products."
Another argument is that taxation of new products with excise duty will give producers of traditional products a sense of justice. According to the tax, "the introduction of excise duty on electronic cigarettes and innovative products, which are a substitute for traditional tobacco products, should result in the burden of excise duty being borne not only by traders operating in the traditional tobacco industry, but also by entities operating in the substitution products industry".
The introduction of the proposed changes outside the regulatory function, i.e. allowing the government to control more closely the turnover of new categories of excise goods, both in terms of production, sales and distribution, has a fiscal dimension in particular, as the Ministry of Finance provides for revenue to the state budget for a new tax at the level of 75,000,000 PLN.