Tax policy doesn’t always seek to shape behavior. But once it tries, it must follow through.
The European Union’s outdated tobacco excise tax rules are a prime example. The current framework, designed over a decade ago, taxes traditional cigarettes aggressively but leaves newer products—such as heated tobacco, e-cigarettes, and nicotine pouches—in a regulatory gray area.
The result is a de facto subsidy for products that aren’t necessarily safer, just newer. When regulators tax one product heavily and leave its competitors lightly taxed or entirely untouched, they aren’t acting neutrally—they’re influencing consumers’ decisions. With tobacco, this may have real public health consequences.
The obligation to draft sound tax policy is comparable to the duty to rescue. Legally, you don’t have to save someone from drowning. Once you begin the effort, however, you commit to not making things worse.
So too should be the case with tax policy. Governments don’t need to impose excise taxes to curb tobacco use. But when the EU made that choice, it started the rescue effort. Leaving an outdated policy in place while the market evolves amounts to regulatory neglect. In public finance, as in rescue, such neglect can lead to serious harm.
It’s time for the EU to finish what it started and update the tobacco tax rules to reflect the market realities of 2025. A future-proofed tobacco excise tax would adopt product-neutral tax principles based on nicotine concentration or addictiveness and health risk. Such a policy would tax the social externality rather than the product shape.
—Andrew Leahey
Welcome to the Week in Insights for Bloomberg Tax’s latest analysis and news commentary. This week, experts examined House Republicans’ plan to raise the state and local tax deduction limit, the use of sales tax automation for separately stated tariffs, and more.
The Exchange —It’s where great ideas on tax and accounting intersect.
Insights
NY Tax Decision Over Online Retailers May Embolden Other States
Baker McKenzie’s Niki Ford says the New York Supreme Court’s state income tax decision affecting out-of-state online retailers should prompt businesses to be mindful of the ruling’s potential implications.
Hawaii’s New Cruise Tax Is Entering Some Uncharted Legal Waters
Maritime attorney Peter Walsh says Hawaii’s new accommodations tax on cruise passengers raises legal complications but could launch a broader debate about how to regulate— and tax—cruise tourism.
Vouchers as Tax Credits Fail to Deliver on School Choice Promise
Emory Law’s Michael Broyde writes in the aftermath of the Supreme Court deadlock that he supports government funding of parochial education, but vouchers are the least effective funding mechanism.
We Need Better Detailed Disclosures on Intangible R&D Assets
Retired Johnson & Johnson executive Stephen Rivera shares accounting guidance for companies working with intangible assets in research and development.
Quadrupling SALT Cap May Vex States With Passthrough Entity Tax
CBIZ’s John Bonk says that Republicans’ plan to raise the state and local tax deduction limit to $40,000 would likely prompt state lawmakers to reevaluate their SALT cap workarounds.
Small Businesses at Risk From Cuts in House Republicans Tax Bill
CBPP’s Chuck Marr says the House GOP spending package would cause health-care premiums to soar for many small businesses and potentially reduce their customer base by cutting aid for low- and middle income families.
Trump’s IRS Chief Counsel Choice Not a Friend to Whistleblowers
Attorneys at Whistleblower Partners say IRS chief counsel nominee Donald Korb has made remarks and took actions that were hostile toward whistleblowers that could jeopardize additional tax revenue if he is confirmed.
Avoiding ‘Tariff Whiplash’ Requires a Robust Automation Approach
Moss Adams experts say companies imposing separately stated tariffs should apply a flexible, scalable approach to sales tax automation.
Boosting US R&D Demands Tax Code That Drives, Not Chokes, Change
Kip Eideberg of the Association of Equipment Manufacturers says reversing a specific provision of the tax code would help companies fix research and development expensing.
Want to Save DEI? Perform Equal Opportunity Audits for Fairness
Northwestern’s Alvin Tillery Jr. says employers can preserve the spirit of DEI by listing merit-based criteria for jobs, collecting demographic data on applicants, and comparing hiring outcomes.
How to Steady Your Revenue, Maximize Your Business Law Practice
CorpNet’s Nellie Akalp explains how these secondary white glove offerings can help maximize revenue and deepen client relationships for your firm.
Columnist Corner
As the government plans to stop minting the penny, states revising their sales tax regulations should adopt a policy to keep the system “from unraveling over a coin we should have eliminated years ago,” Andrew Leahey writes in his latest Technically Speaking column.
Adopting a system that allows nickel-based rounding only for cash “encourages a shift toward electronic payments, where totals are exact, transactions are fully auditable, and opportunities for underreporting sales tax shrink,” Andrew says. Read More
News Roundup
Dubious Credit Promotion Intensifies Campaign for Tribal Tax Law
A Democrat and a Republican in the House plan to revive legislation they hope will provide parity and close loopholes in tribal tax law, an effort that comes amid the proliferation of so-called sovereign tribal tax credits the Treasury Department and IRS say don’t exist.
Washington State Digital Ad Tax Set for Changes, Court Challenge
Washington state lawmakers expect to make changes to a new law applying sales tax to digital advertising even as they prepare for lawsuits seeking to strike it down.
More Rich Taxpayers Hit With AMT Under House GOP Legislation
The number of wealthy Americans paying the individual alternative minimum tax could grow if a change in the House-passed Republican tax-and-spending package remains in place.
EU Countries Back Shell Company Bill Revamp, Data-Sharing Focus
EU countries backed a Polish proposal to largely reject a European Commission bill to tackle shell companies for tax purposes, according to people familiar with the matter.
Tax Management International Journal
How Do US and Dutch Transfer Pricing Methodologies Differ?
In this third article of a multi-part series comparing US and Dutch transfer pricing methodologies, Patrick Beattie presents a comparative analysis on the transfer pricing methodologies in the two countries.
OECD Consolidated Report on Amount B Provides TP Shortcuts
The OECD’s Consolidated Report on Amount B incorporates a formulaic safe harbor into the OECD Transfer Pricing Guidelines that provides low-capacity jurisdictions the administrative shortcut they have long needed and offers multinationals predictability, say Kreston Global practitioners.
Indian Global Capability Centers—What Is the Cost of Delivery?
Multinational companies with Global Capability Centers in India that use cost-based transfer pricing should adequately document their positions in inter-company agreements to explain their rationale as well as use APAs and MAPS to achieve certainty, say KPMG practitioners.
Green Card Holders Must Strategize to Avoid Financial Landmine
Green card holders should be careful of what they sign when re-entering the US because of unexpected tax consequences, say Melvin Warshaw and David Lesperance.
Career Moves
Brett Fieldston joined Fried Frank as a tax partner in New York.
If you’re changing jobs or being promoted, send your submission to TaxMoves@bloombergindustry.com for consideration.
To contact the editors responsible for this story:
Learn more about Bloomberg Tax or Log In to keep reading:
Learn About Bloomberg Tax
From research to software to news, find what you need to stay ahead.
Already a subscriber?
Log in to keep reading or access research tools.