Taxing questions about EU funding to fight illicit trade in tobacco products

The funds contributed by four multinational tobacco manufacturers to the EU purportedly to help fight the illicit trade in tobacco products are paid into the EU’s general budget. There is no earmarking of the funds.

This was made clear by the European Commission in answer to two written parliamentary questions by the Irish member of the European Parliament, Nessa Childers.

In a preamble to her questions, Childers said that to address the problem of contraband and counterfeit cigarettes, OLAF had signed legally binding and enforceable agreements with the world’s four largest tobacco manufacturers under which they had agreed to pay a collective total of US$2.15 billion to the EU and countries participating in the agreement, and to support action to prevent their products from falling into the hands of criminals.

‘Does the Commission not believe this extensive financial relationship creates a potential conflict of interest between OLAF as the EU’s anti-fraud office, the Commission as the regulator, and the tobacco industry?’ Childers asked.

‘What safeguards does the Commission have in place to prevent a conflict of interest in this case?’

In answer, the Commission said that the agreements were between the tobacco manufacturers on the one hand and the EU and the participating member states on the other.

The funds received by the EU in accordance with the agreements amounted to just under 10 per cent of the total and were paid directly into the general budget of the EU in line with the principle of universality. There was no earmarking of the funds.

The remaining funds received were transferred to the participating member states.

There was no financial relationship and no conflict of interest between OLAF and the tobacco manufacturers, the Commission said.

At least two other questions arise from this. How much of the money provided by the manufacturers goes towards the fight against the illicit trade in tobacco products?

Why is the smoker being taxed in this way – given that it is the smoker who ultimately pays the levy?