675. Deputy Cian O'Callaghan asked the Minister for Finance further to Parliamentary Question No. 254 of 1 July 2025, if his Department will review a tax system (details supplied); and if he will make a statement on the matter. [42301/25]
676. Deputy Cian O'Callaghan asked the Minister for Finance further to Parliamentary Question No. 254 of 1 July 2025, his views about tax non-compliance in an area (details supplied); and if he will make a statement on the matter. [42302/25]

Paschal Donohoe, Minister for Finance: I propose to take Questions Nos. 675 and 676 together.

A new national excise duty, known as E-Liquid Products Tax (EPT), was legislated for in Finance Act 2024. Commencement of the new tax is subject to Ministerial Order, and arrangements are well advanced for EPT to come into operation later this year. The tax is being introduced on public health grounds to help reduce the growing prevalence of e-cigarette usage in Ireland, particularly among young people.

Under the new law, EPT will apply to both nicotine-containing and non-nicotine-containing e-liquid products. Similar to the approach for other national excises, the taxing point will be the first supply of e-liquid product in the State and the tax will follow Revenue’s standard model of self-assessment. Suppliers of e-liquid product will be required to register with Revenue in advance of making a first supply of e-liquid products in the State. These suppliers will be liable to account for and pay the tax.

At present, there is no EU-wide taxing regime for e-cigarettes or e-liquids. Therefore, many Member States, including Ireland, have moved to introduce their own national excises on these products for health policy reasons. Ireland’s EPT has been designed to be as effective as possible having regard to the limitations of this non-harmonised situation.

In particular, as a national excise, the operation of EPT must be compatible with the EU Single Market rules which preclude the use of cross-border movement controls. This means that e-liquid products coming into the State from other Member States or Northern Ireland (which is part of the Single Market for goods) cannot be subject to the type of cross-border movement controls that are integral to the regimes for the existing EU-harmonised excises on tobacco, alcohol or mineral oils. In addition, because they are outside the harmonised tax regime, e-liquid products are also outside the scope of the Excise Movement and Control System (EMCS) – the system to tightly control the movement of harmonised excisable goods through authorised tax warehouses with duty suspension arrangements; it is the EMCS system that enables the charge to tax on those goods to arise only at the point when the product is ‘released for consumption’ from the tax warehouse.

In those circumstances, therefore, it was concluded that charging EPT at the point of first supply of the product in the State is, on balance, the most appropriate approach for this new national excise. In particular, the alternative model of a ‘released for consumption’ approach to charging EPT would require the development and operation of a complex national (non-EMCS) system of tax warehousing and controls. Such a system would have limited effectiveness in a non-harmonised regime - given that it could only operate on a national basis and without recourse to cross-border controls - and the cost of setting up and operating such a system could not be justified given such limitations on its potential effectiveness.

My Department has had engagement with industry over the last 12 months to discuss the new tax and, amongst other things, the question of tax stamps for which the industry has been advocating. In Ireland, tax stamps are currently used in respect of two products only – cigarettes and roll-your-own tobacco – and use of the stamps is closely integrated with the ‘released for consumption’ model of taxation that applies to those particular products. However, tax stamps are not being applied to the new EPT, because it is not at all clear how they could be an effective compliance tool within the ‘first supply in the State’ taxation model on which EPT has been designed. Although tax stamps can work well in a ‘released for consumption’ tax model, as explained, such a model would not be suitable for a non-harmonised national excise such as EPT.

Ahead of EPT’s introduction later this year, Revenue will be raising awareness of the new tax among those who are required to register for it. Detailed information will issue to suppliers about when and how to complete their registration and subsequently meet their obligations regarding filing and payment. Such support and guidance will be essential to assist supplier businesses in complying with the new tax, especially in its early days. As the new tax becomes established, Revenue will also undertake appropriate compliance work to ensure that businesses are properly registering, filing, and paying. As with all taxes, Revenue’s focus will be on providing support to taxpayers who are seeking to comply with their obligations, while actively working to identify and pursue those who are not.

The Deputy refers to a recent report commissioned from an independent consultancy firm by a company in the e-liquid industry. The report argues for a tax stamp, and it presents an analysis to indicate that not using tax stamps would give rise to large-scale non-compliance with EPT. However, the report fails to recognise that, in order for tax stamps to work effectively, they need to be used as part of a tax model such as ‘released for consumption’, and that such a model is not appropriate for a national excise like EPT, for the reasons I have explained. Therefore, the overall argument put forward in the report is not compelling. 

Finally, the Deputy may be aware that on 16 July, the European Commission published a legislative proposal to revise the Tobacco Tax Directive; amongst other changes, the proposal includes the introduction of harmonised taxation of e-liquids across the EU and bringing e-liquid products into the current EMCS system. Having recently stood with my colleague Finance Ministers from many other Member States in calling on the Commission to bring forward such reforms, I strongly welcome the publication of the new proposals which my Department and Revenue are now examining, and we look forward to engaging constructively in the discussions that will be getting underway at EU Council. The Commission proposal entails the development and introduction of a harmonised tax and control regime for e-liquid products across the EU, and the potential role of a tax stamp can be considered in the future in the context of implementing such a system.

Question No. 676 answered with Question No. 675.