The European Commission has issued a final warning to the Government over its policy of setting a minimum price on tobacco products to protect public health.
Tax commissioner László Kovács threatened yesterday to bring Ireland to the European Court of Justice (ECJ) within two months if it did not change its practice.
He also alleged that the Government was colluding with tobacco manufacturers by setting a minimum price on a packet of cigarettes because it protected their profit margins.
"I strongly support member states in their efforts to implement new health policy. However, this must respect Community law," said Mr Kovács. "Introducing minimum retail prices for cigarettes is against Community law and mainly benefits manufacturers who are able to protect their profit margins".
Under an agreement reached with the Irish Tobacco Manufacturers' Advisory Committee, the Department of Health has set a minimum price for the sale of 20 cigarettes of about €1.30. This price was set by using information on volume sales supplied by the tobacco companies for filtered and unfiltered cigarettes.
The Government says the agreement with the tobacco manufacturers was made for the primary purpose of preventing low-cost selling of tobacco products in Ireland.
By setting a minimum retail price for a packet of 20 cigarettes it undermines the ability of retailers to provide special cut- price offers on certain brands. Price control is also seen as a viable way to protect children from becoming addicted to cigarettes and to encourage existing smokers to quit, according to the Department of Health.
A Government spokesman said yesterday that Ireland had a fundamental disagreement with the commission over the setting of minimum prices on tobacco products and would fight any legal action at the ECJ.
"We see minimum prices as a legitimate policy tool to protect human health and if this legal threat follows its path logically, then we will go to the ECJ on the issue," he said.
But Mr Kovács said Ireland did not have to set minimum prices because the health objectives on smoking could be attained by increased taxation of tobacco products.
About 80 per cent of the price of a packet of cigarettes in Ireland is made up of tax.
In the "reasoned opinion" letter sent to the Government yesterday, Mr Kovács said that the imposition of a minimum price was incompatible with the current legal framework because it limited the freedom of producers and importers to determine their selling price.
"Unless the legislation in the member states concerned is brought into compliance within two months of receipt of the reasoned opinion, the commission may decide to refer the case to the Court of Justice of the European Communities," he added.
Smoking-related illnesses account for more than 6,000 deaths a year in Ireland and 750,000 deaths a year throughout the EU.
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