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Business

Court Targets German Tobacco Tax Break

A senior EU judge advised Thursday the European Court of Justice that the German government is wrong to impose lower taxes on certain types of cigarettes, potentially leading to a ruling causing substantial sale losses for tobacco companies. Advocate-General Francis Jacobs, who counsels the European Union's highest court, said Germany must close a tax loophole allowing cigarette manufacturers to sell "singles" -- pre-made cylinders of tobacco sold with a paper shell and a stick -- at lower excise duty rates than regular ready-made cigarettes. While the advocate-general's opinion is not legally binding, it provided a good indication of the final result with the court judgment following suit in eight out of 10 cases. Singles are sold around 20 percent cheaper than regular cigarettes in Germany, as the government taxes them as 'fine-cut tobacco,' the same classification as original roll-ups with loose tobacco, rather than as pre-made cigarettes. The singles market -- virtually unique to Germany and accelerating since 2004 -- is said to be worth one billion euros ($1.2 billion) and generates tax revenues of a similar amount.

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