JUDGMENT NO. 183

YEAR 2025

ITALIAN REPUBLIC

IN THE NAME OF THE ITALIAN PEOPLE

THE CONSTITUTIONAL COURT

composed of:

President: Giovanni AMOROSO;

Judges: Francesco VIGANÒ, Luca ANTONINI, Stefano PETITTI, Angelo BUSCEMA, Emanuela NAVARRETTA, Maria Rosaria SAN GIORGIO, Marco D’ALBERTI, Giovanni PITRUZZELLA, Massimo LUCIANI, Maria Alessandra SANDULLI, Roberto Nicola CASSINELLI, Francesco Saverio MARINI,
has pronounced the following

JUDGMENT

in the constitutional legitimacy review of Article 39-octies, paragraphs 6, 7, and 8, of Legislative Decree of October 26, 1995, no. 504 (Consolidated Text of legislative provisions concerning production and consumption taxes and related criminal and administrative sanctions), as amended by Article 1, paragraph 1074, of Law of December 30, 2018, no. 145 (State Budget for the financial year 2019 and multi-year budget for the three-year period 2019-2021), by Article 1, paragraph 659, of Law of December 27, 2019, no. 160 (State Budget for the financial year 2020 and multi-year budget for the three-year period 2020-2022), by Article 1, paragraph 122, of Law of December 29, 2022, no. 197 (State Budget for the financial year 2023 and multi-year budget for the three-year period 2023-2025), as well as by Article 1, paragraph 48, letter a), number 3), of Law of December 30, 2023, no. 213 (State Budget for the financial year 2024 and multi-year budget for the three-year period 2024-2026), initiated by the Regional Administrative Court for Lazio, Second Section, with an order of July 31, 2024, registered under no. 223 of the ordinary resolutions register 2024 and published in the Official Gazette of the Republic no. 50, special series one, of the year 2024.

Having noted the appearances of Yesmoke srl in liquidation and Italian Tobacco Manufacturing srl, in its own name and as assignee of the ownership of the business unit of Manifattura Italiana Tabacco spa, as well as the intervention of the President of the Council of Ministers;

Having heard Judge Rapporteur Luca ANTONINI in the public hearing of November 18, 2025;

Having heard the lawyers Giuseppe Franco Ferrari and Chiara Giubileo for Yesmoke srl in liquidation, Pierluigi Piselli and Gianluca Sestini for Italian Tobacco Manufacturing srl, in its own name and as assignee of the ownership of the business unit of Manifattura Italiana Tabacco spa, as well as the State Attorney Fabio Tortora for the President of the Council of Ministers;

Deliberated in the Chamber of Council on November 18, 2025.

Facts Considered

1.– With the order of July 31, 2024 (registered under no. 223 of the ordinary resolutions register 2024), the Regional Administrative Court for Lazio, Second Section, raised questions of constitutional legitimacy, with reference to Articles 11 and 117, first paragraph, of the Constitution, in relation to Article 7, paragraphs 2, 3, and 4, of Council Directive 2011/64/EU of June 21, 2011, concerning the structure and rates of excise duty applied to manufactured tobacco, Article 101 of the Treaty on the Functioning of the European Union, as well as Article 4 of the Treaty on European Union, concerning the constitutional legitimacy of Article 39-octies, paragraphs 6, 7, and 8, of Legislative Decree of October 26, 1995, no. 504 (Consolidated Text of legislative provisions concerning production and consumption taxes and related criminal and administrative sanctions), as amended by Article 1, paragraph 1074, of Law of December 30, 2018, no. 145 (State Budget for the financial year 2019 and multi-year budget for the three-year period 2019-2021), by Article 1, paragraph 659, of Law of December 27, 2019, no. 160 (State Budget for the financial year 2020 and multi-year budget for the three-year period 2020-2022), by Article 1, paragraph 122, of Law of December 29, 2022, no. 197 (State Budget for the financial year 2023 and multi-year budget for the three-year period 2023-2025), as well as by Article 1, paragraph 48, letter a), number 3), of Law of December 30, 2023, no. 213 (State Budget for the financial year 2024 and multi-year budget for the three-year period 2024-2026).

1.1.‒ The TAR Lazio states that the questions arose in the course of two consolidated proceedings brought respectively by the companies Manifattura Italiana Tabacco spa (MIT) and Italian Tobacco Manufacturing srl (ITM), including with supplementary pleadings, against the directorial determinations of the Customs and Monopolies Agency (ADM) relating to the years 2020, 2021, and 2022, and by Yesmoke srl (YM), against the directorial determination for the year 2022.

The challenged determinations updated, for each year, the breakdown table of the retail selling price of cigarettes, following the identification of the Minimum Fiscal Burden (MFB), pursuant to Article 39-quinquies of Legislative Decree no. 504 of 1995, as amended.

In the appeals, the companies had pointed out that they were Italian enterprises that produced and marketed cigarettes on the national market at a price lower than the parity price, i.e., close to the weighted average price that the national legislator had taken as a reference for calculating the MFB.

2.‒ The challenged provisions, contained in paragraphs 6, 7, and 8 of Article 39-octies of Legislative Decree no. 504 of 1995, as amended, concern the national taxation regime for cigarettes with specific reference to the MFB discipline and provide, in the currently effective text resulting from the amendments referred to in Article 1, paragraph 48, letter a), number 3), of Law no. 213 of 2023, that: "6. For manufactured tobacco products referred to in Article 39-bis, paragraph 1, letter b) (cigarettes), the minimum fiscal burden, referred to in Article 7, paragraph 4, of Council Directive 2011/64/EU of June 21, 2011, shall be equal, for the year 2023, to 98.10 percent of the sum of the total excise duty constituted by the two components referred to in letters a) and b) of paragraph 3 of this Article, and the value-added tax calculated with reference to the "Cigarette WAP” [Weighted Average Price]; the same percentage shall be determined at 98.70 percent for the year 2024 and at 98.80 percent from the year 2025 onwards. 7. The minimum fiscal burden referred to in paragraph 6 shall apply to selling prices for which the sum of the value-added tax, applied pursuant to Article 39-sexies, and the excise duty, applied pursuant to paragraph 3, is less than the said minimum fiscal burden. 8. The excise duty on the selling prices referred to in paragraph 7 shall be equal to the difference between the amount of the minimum fiscal burden referred to in paragraph 6 and the amount of the value-added tax applied pursuant to Article 39-sexies.”

The mechanism for calculating the MFB provided by the national legislator is thus linked to the trend of the weighted average price ("Cigarette WAP”), consisting, according to Article 39-quinquies, paragraph 2, of Legislative Decree no. 504 of 1995, in "the ratio, expressed in euros with truncation of decimals, between the total value, calculated with reference to the retail selling price including all taxes, of cigarettes placed on the market in the preceding calendar year and the total quantity of the same cigarettes.”

3.‒ The TAR Lazio acknowledges that, with orders no. 13610 of 2022 and no. 8199 of 2023, it had already "referred for review by the Constitutional Court the questions of constitutional legitimacy of 'Article 39-octies, paragraphs 1-8, of Legislative Decree no. 504/1995, in relation to the violation of Articles 11 and 117 of the Constitution, supplemented by the interposed discipline set out in Articles 7, paras. 3 and 4, 14, para. 1, and 15, para. 1, of Directive 2011/64/EU on the minimum fiscal burden'” and that this Court, with Judgment no. 220 of 2023, had declared them inadmissible "due to an incomplete reconstruction of the reference regulatory framework,” as the referring court had not "addressed numerous provisions of Directive 2011/64/EU which should have been necessarily considered in order to motivate the doubts of Community compatibility and constitutional illegitimacy regarding the relationship between the MFB and the ‘Cigarette WAP’ established by the challenged national provision.”

The referring court specifically points out that, with the aforementioned Judgment, "The Court highlighted the deficient or absent analysis of the following references drawn from Directive No. 2011/64/EU: - paragraph 4 of Article 8, insofar as it anchors the amount of excise duty on cigarettes to the Cigarette WAP, affecting, like the MFB, proportionately more the progressively higher prices; - Recital 14, which relates the ad valorem component to the weighted average price of cigarettes; - Article 10, paragraph 2, according to which the total excise duty, from 1.1.2014, is at least 60% of the Cigarette WAP; - Article 8, paragraph 6, which allows Member States to apply a minimum excise duty on cigarettes.”

4.‒ Having stated this, the TAR Lazio emphasizes that, "having analyzed the reference regulatory framework (national and European), also in light of the reasons given by the Constitutional Court in Judgment no. 220/2023, the relevance of the constitutional question and its non-manifest groundlessness persist.”

It considers, in fact, that the challenged provisions conflict with "Articles 11 and 117 of the Constitution, supplemented by the interposed discipline set out in Article 7, paragraphs 2, 3, and 4, of Directive 2011/64/EU, as well as the principles of free competition and proportionality pursuant to Articles 101 [Treaty on the Functioning of the European Union (TFEU)] (with Protocol no. 27) and 4 [Treaty on European Union (TEU)] (with Protocol no. 2).”

5.‒ The referring court reaches this conclusion after comparing the Union discipline, concerning the fiscal burden related to the sale of cigarettes, with the national discipline.

5.1.‒ Firstly, it examines the general principles established by Recitals 2, 9, 10, 11, 12, 13, and 14 of the Directive and highlights that "[f]rom the aforementioned ‘Recitals’ of the Directive, it can be inferred that, in the sector of manufactured tobacco (and cigarettes primarily), the European Union intends to achieve the objective of harmonizing taxation mainly to protect the proper functioning of the Union market (cf. Recitals no. 9, 10, 12, and 14). To this end, the Directive provides for a tripartite structure of taxation (ad valorem excise duty, specific excise duty, and value-added tax - cf. no. 11) and the necessity to include minimum excise duty values (no. 13).”

It further specifies that "[t]his structure does not exclude, particularly for cigarettes, but rather expressly contemplates – given the undoubted impact of these products on human health – the need to safeguard health objectives (no. 14) and to apply a minimum fiscal burden in the Union, i.e., a minimum taxation levied on tobacco products.”

Therefore, according to the referring court, the minimum fiscal burden is conceived by the Directive "as a tool, at the same time, for harmonizing taxes at the Union level (a minimum burden is set, so as to avert excessive price imbalance among the various States) and for safeguarding health (an excessively low product price encourages its overconsumption).”

5.2.‒ Secondly, it analyzes the specific provisions contained in the Directive, in particular: Article 7, paragraph 2, which establishes that "[t]he rate of ad valorem excise duty and the amount of specific excise duty must be the same for all cigarettes”; Article 7, paragraph 3, which provides: "for cigarettes in all Member States the same ratio between the specific excise duty and the sum of the ad valorem excise duty and the value-added tax, so that the range of retail selling prices reflects equitably the gap in manufacturers' selling prices”; Article 7, paragraph 4, which, with a concluding provision, clarifies that "[t]o the extent that it proves necessary, the excise duty on cigarettes may involve a minimum fiscal burden, provided that the mixed structure of taxation and the range of the specific excise duty component, pursuant to Article 8, are strictly respected”; Article 8, paragraph 4, according to which "[…] the specific excise duty component on cigarettes shall not be less than 7.5% and not more than 76.5% of the total fiscal burden resulting from the aggregation of the following elements: a) the specific excise duty; b) the ad valorem excise duty and the value-added tax (VAT) applied to the weighted average retail selling price”; Article 8, paragraph 6, according to which "[s]ubject to paragraphs 3, 4 and 5 of this Article and Article 7, paragraph 1, second subparagraph, Member States may apply a minimum excise duty on cigarettes”; Article 10, paragraph 2, according to which "[…] the total excise duty on cigarettes shall be at least 60% of the weighted average retail selling price of cigarettes placed on the market. The excise duty shall not be less than 90 EUR per 1,000 cigarettes, regardless of the weighted average retail selling price.”

5.3.‒ The referring court then turns its attention to the national provisions contained in paragraphs 6, 7, and 8 of Article 39-octies of Legislative Decree no. 504 of 1995 concerning the mechanism for applying and calculating the MFB.

Following this analysis, the referring judge considers that the national discipline conflicts with the Union discipline.

It points out, however, that its disapplication would not be possible, as the Union discipline on the MFB would not have "so-called vertical direct effect,” since the provision in Article 7 of the Directive "is not categorical in nature and, therefore, does not have direct effect,” given that its introduction was left to the will of national legislators, including for the purpose of concrete application.

Hence the necessity to submit to this Court the questions of constitutional legitimacy of the challenged provision for violation of Articles 11 and 117, first paragraph, of the Constitution.

6.‒ Regarding relevance, the referring court considers that, in the pending proceedings, the declaration of unconstitutionality of the challenged provisions would result in "the invalidity (under the guise of nullity or voidability) of the measures prejudicial to the subjective legal position claimed in the case, with possible repercussions also under the compensation profile.”

7.‒ Regarding non-manifest groundlessness, it observes that the mechanism for calculating the MFB under Article 39-octies, paragraphs 6, 7, and 8, of Legislative Decree no. 504 of 1995, proves to be "disruptive of the competitive process, introducing a tax system unjustifiably penalizing, in price dynamics, low-end cigarette producers, to the advantage of mid-to-high-end producers (oligopolists holding over 90% of the market share, according to what emerges from the unchallenged statements of the applicants).”

7.1.‒ It highlights, in this regard, that the conflict with Union law does not derive from the "choice in itself by the national legislator to introduce the minimum fiscal burden on cigarettes,” which is expressly provided for by Article 7, paragraph 4, of the Directive, but rather from the "method of implementing and regulating the MFB, in its overall operation,” resulting from the combined provisions of paragraph 6 of Article 39-octies of Legislative Decree no. 504 of 1995 – according to which, for the calculation of the MFB, the "Cigarette WAP” must be used – and the subsequent paragraphs 7 and 8.

It observes, in fact, that, under the challenged provision, from the lowest product price bracket, the overall fiscal burden remains constant up to the parity price. Instead, above the parity price, "the excise duty resumes an increasingly rising trend as selling prices increase.”

This method of determining the MFB makes "the level of taxation homogeneous for a consistent range of products (those in the lower bracket compared to those in the mid-range, i.e., those close to the WAP) through the provision of a decreasing excise duty system, automatically and without the possibility for the relevant public body to verify whether the level, at which (by application of the law) the MFB is set, satisfies the public interest in protecting health and market stability and, therefore, competition.”

The forced alignment of the minimum tax levy results in low-end producers, due to the erosion of profits derived from the MFB, being forced "to significantly raise the level of prices […], despite having the possibility of competitively placing cigarettes at a lower price on the market.”

The challenged national discipline, therefore, conflicts with the specific provisions of the Directive on the "neutrality of the fiscal impact and the protection of the market and competition pursuant to Article 7, paragraphs 2, 3, and 4 (as interposed norms), as to be interpreted also in light of Recitals no. 9, 10, 12, 13, and 14, and thus also Articles 11 and 117 of the Constitution.”

7.2.‒ In particular, Article 7, paragraph 3, of the Directive is violated, because, by aligning the prices of low-end cigarettes with those of the mid-range, the economic effect is produced that "selling prices do not reflect manufacturers’ transfer prices, but significantly increase those of the low-end, to the detriment of the producers of the latter, who cannot be competitive with multinationals (which produce mid-to-high-price cigarettes).”

7.3.‒ A conflict with Article 7, paragraph 2, of the Directive is also conceivable, because the method of calculating the MFB would be "penalizing for lower-end cigarettes, by applying a decreasing excise duty.” The referring court points out that the aforementioned provision "establishes, essentially, that the proportional component of the excise duty (i.e., the so-called ad valorem component, with its rate) is identical for all cigarettes (therefore irrespective of their price level), so that the revenue from the ad valorem excise duty should be proportional to the price, varying upwards and only in relation to it. As for the specific excise duty, fixed per unit of product, the provision stipulates that the amount (i.e., the final levy) is identical, and therefore invariable with respect to the variation in the selling price of cigarettes.”

It therefore considers that, since the specific excise duty should not vary with the selling price and the ad valorem one should be proportional to it, "the total excise duty should necessarily be increasing as prices increase due to the ad valorem component, proportional to the selling price.”

Instead, in the national system, "the total excise duty applied is decreasing, (at least) from the minimum level to the average level of cigarette prices.”

7.4.‒ Finally, Article 7, paragraph 4, of the Directive is violated, because the MFB was introduced automatically, moreover linked to an ever-increasing percentage of the rate to be applied, without any connection to the purpose of the institution, namely its suitability to protect human health (individual and collective), potentially affected by excessive consumption of cigarettes, as well as the stability and competitive regime of the Union market. In fact, the MFB, which the Union legislator provides as optional for Member States, could only be justified if aimed at stabilizing prices in the market, thus protecting competition, as well as counteracting the risk of excessive consumption of cigarettes, thus protecting health.

Instead, the referring court highlights, the national MFB system has resulted in an "anti-competitive effect due to its automatism, disconnected from the need to adequately and balancedly counteract the excessive lowering of prices.”

Furthermore, since the cigarette market is "typically and notoriously oligopolistic,” it is not unlikely that the "Cigarette WAP” "is influenced by the price-raising policies of oligopolists and that, therefore, the MFB is set at an unjustifiably high level, not connected to the need to safeguard human health.”

8.‒ According to the referring court, the principles of free competition and proportionality under Articles 101 TFEU and 4 TEU are also violated.

9.‒ The referring court finally clarifies that, with reference to the provisions "examined” by this Court in Judgment no. 220 of 2023, the Directive "does not contain provisions that legitimize the provisions of Article 39-octies, paragraphs 6, 7, and 8 of Legislative Decree no. 504/95 regarding the minimum fiscal burden,” considering that: "Article 7, paragraph 4 does not establish the methods for determining the MFB; - Article 8, paragraph 6 provides for the possibility of establishing a minimum excise duty, without further details, except for those referred to in the preceding paragraphs 4 and 5; - Article 8, paragraph 4, by stipulating that the specific excise duty may reach up to 76.5% of the total taxation (i.e., summing specific excise duty, ad valorem excise duty, and VAT), does not affect the *modus operandi* for calculating the MFB, which instead depends on the application of a rate (that provided for in paragraph 6 of Article 39-octies) in relation to the overall taxation (total excise duty + VAT) and the reference, for the ad valorem excise duty and VAT, to the WAP; – […] Article 10, paragraph 2, by providing a double limit to the amount of the minimum total excise duty (in absolute value and as a percentage of the Cigarette WAP), certainly affects the amount of taxation but does not shift the terms of the question […].”

10.‒ The President of the Council of Ministers intervened in the proceedings, represented and defended by the State Attorney's Office, which requested that the questions be declared inadmissible and, in any case, unfounded.

10.1.‒ On procedural grounds, the State defense objects to the inadmissibility of the questions.

It emphasizes that this Court, with Judgment no. 220 of 2023, had declared the questions raised in that incidental proceeding of constitutional legitimacy review inadmissible "due to an incomplete reconstruction of the reference regulatory framework.”

It observes, therefore, that the referring court, in reformulating the questions of constitutional legitimacy, limited itself to a summary review of the regulatory framework, "essentially replicating the perspective already reviewed negatively by the Judge of Laws.”

10.2.‒ As to the merits, according to the Attorney's Office, the questions are unfounded.

It emphasizes, in particular, that the MFB applies to all cigarette prices for which the sum of the excise duty, calculated based on the two components, specific and ad valorem, and VAT, calculated by applying the standard rate, is less than this value.

Since the "Cigarette WAP” is determined, by March 1st of each year, in relation to the data for the preceding year and calculated based on the total value of cigarettes placed on the market in relation to their total quantity, it should follow that "taxation is anchored to a more stable market data, defined by the choices of all its operators,” not undergoing "fluctuations depending on changes in consumption patterns such as the most requested price class,” thus resulting in it being "less influenced by the tariff policies practiced by producers.”

In the view of the State defense, the national mechanism for determining the MFB is therefore consistent with Union discipline, because it guarantees the proper functioning of the internal market and responds "also to the need to protect public health.”

The provision of the MFB is found to be "consistent with the objectives of a minimum taxation burden […] as it affects very low prices more significantly and higher prices less so.”

Therefore, the principles of competition protection and health protection are not violated, because, while "the provision of the minimum fiscal burden inevitably affects low-priced cigarettes more,” on the other hand, "the possibility for States to provide for it is linked, as is evident from the recitals of the Directive, to the need to ensure a certain level of tax convergence, both to reduce fraud and smuggling, and to guarantee a high level of human health protection, by discouraging the supply of low-quality cigarettes or those sold at a lower price.”

Moreover, the State defense continues, cigarette producers "could still freely decide to absorb, in whole or in part, the fiscal burden, by not applying any increase or a more contained increase to the product.”

Nor is there any internal discrimination in the market, because the tax measures referred to in the challenged provisions "are naturally equal for all taxpayers,” with only the "incidence that they may have on the free tariff policies of entrepreneurs” being different.

11.‒ ITM constituted itself in the proceedings, "in its own name and as assignee of the full and exclusive ownership of the business unit of Manifattura Italiana Tabacco spa.”

The company believes, adhering to the referrer's position, that the challenged provisions violate Union discipline, as they determine "an automatic mechanism for calculating the minimum fiscal burden and, consequently, the price of cigarettes, dependent on the strategic choices of the (few) major producers (who represent 90% of the market), which brings the retail selling prices of low-end cigarettes closer to the retail selling prices of high-end cigarettes, essentially neutralizing the price differences between the various products.”

This calculation method, in fact, produces a distortion of competition "as the consumer, at the same price, will opt for high-end cigarettes, which are qualitatively better.”

It particularly highlights that the distorting effect is the direct consequence of two concurrent factors.

On the one hand, an MFB of the same amount is provided to be applied across all cigarette price brackets, "with the consequence that this burden will weigh more heavily on producers of low-end cigarettes and will reduce the price differences between low-end and high-end cigarettes.”

On the other hand, the MFB is calculated in relation to the "Cigarette WAP,” but, in this way, "the amount of the fiscal burden is automatically linked to the variation in the total selling prices of cigarettes, which depends, precisely, on two factors determined by the competitors themselves, namely the value of the cigarettes (selling price) and the quantity of cigarettes placed on the market”: in this context, "if high-end cigarette producers increase the selling price of cigarettes, consequently, the WAP increases and, therefore, the minimum fiscal burden,” to the prejudice of those operators who produce cigarettes intended for the low-to-mid price bracket because, due to the rise in the minimum fiscal burden, they must necessarily increase the cost of their products, "thus clearly reducing their competitiveness.”

12.‒ YM also constituted itself in the proceedings, arguing in favor of the conflict between the national discipline on the MFB and the Union discipline, highlighting that the excise duty paid by it in 2022 and 2023 had eroded "the remuneration that [the company] could have obtained from the sale of cigarettes,” and this was due to the fact that the amount of the MFB, "unlike in the previous regime (2015-2018), is today automatically linked to the variation in the total selling prices of cigarettes, a variation resulting from […] the conduct of the large tobacco multinationals,” without "a real possibility for small operators to choose prices.”

13.‒ The company ITM, in its own name and as assignee of the business unit of MIT, filed a memorandum close to the public hearing, insisting on the considerations expressed in the statement of constitution and replying to the State defense’s objection of inadmissibility and substantive defenses.

13.1.‒ Regarding the procedural objection, it points out that this Court, with Judgment no. 220 of 2023, did not rule on the merits, having declared the question inadmissible due to the incomplete reconstruction of the regulatory framework, so that, in the present case, the referring court correctly re-proposed the same question of constitutional legitimacy by removing the defect.

13.2.‒ As to the merits, it deems the State defense's interpretation incorrect, according to which the national discipline on the MFB would be consistent with the Directive's purpose of protecting competition and health.

It observes, in fact, that the national MFB, by determining a tendency toward price alignment for low-end cigarettes with those of the mid-range, would have a penalizing effect on producers of low-cost cigarettes, who could not be competitive with multinationals, because the selling prices would not equitably reflect manufacturers' transfer prices, contrary to the principle of fiscal neutrality and free price formation.

Furthermore, it considers that the taxation system in question would not be capable of producing appreciable effects in terms of health protection, as it cannot be excluded that consumers of low-to-mid-range cigarettes, faced with price flattening, choose to move towards higher-end products, without reducing or ceasing consumption.

14.‒ YM also filed a memorandum arguing on the conflict between domestic and Union legislation.

It specified, in particular, the economic effects it suffered due to the challenged provision, as it sustained a fixed MFB, established annually and constantly increasing, and, to compensate for these effects, it had to raise its selling prices until, starting from 2022, it could no longer make this choice, also in consideration of the fact that consumers, at the same price, preferred to buy better-known brands, resulting in a contraction of its sales. The consequence was the company's exit from the market and voluntary liquidation.

On the merits, it contests the State defense's assertion that the MFB is, among other things, aimed at protecting health by discouraging the supply of low-quality cigarettes or those sold at a low price. It clarifies that, in reality, all types of cigarettes sold in Italy should meet the same quality requirements and that, furthermore, it is not accurate to claim that low-end cigarettes can harm health to a greater extent than others because they are of "poor quality.”

Considered in Law

1.‒ The TAR Lazio, Second Section, with order of July 31, 2024 (reg. ord. no. 223 of 2024), doubts, with reference to Articles 11 and 117, first paragraph, of the Constitution, in relation to Article 7, paragraphs 2, 3, and 4, of Directive 2011/64/EU and Articles 101 TFEU and 4 TEU, the constitutional legitimacy of Article 39-octies, paragraphs 6, 7, and 8, of Legislative Decree no. 504 of 1995, as amended.

The aforementioned provisions govern the MFB to be applied to the sale of cigarettes.

According to the referring court, these provisions conflict with Articles 11 and 117, first paragraph, of the Constitution, because they violate the interposed discipline set out in Article 7, paragraphs 2, 3, and 4, of Directive 2011/64/EU which, read and interpreted in light of the recitals contained therein, are aimed at protecting the principles of free competition and, in particular, the free determination of cigarette selling prices, as well as health. The principles of competition and proportionality under Articles 101 TFEU and 4 TEU are also violated.

1.1.‒ The referring court further emphasizes that, while noting the conflict between the national discipline and the Union discipline, its disapplication is not possible, since Directive 2011/64/EU does not have "so-called vertical direct effect,” as the provision in Article 7 contained therein "is not categorical in nature and, therefore, does not have direct effect,” given that the choice whether to introduce the MFB, also for the purpose of concrete application, was left to the will of national legislators.

Hence the necessity to submit to this Court the questions of constitutional legitimacy of the challenged provisions with reference to Articles 11 and 117, first paragraph, of the Constitution.

1.2.‒ With regard to the merits, the TAR Lazio reiterates that the purpose of the Directive, discernible from Recitals 9, 10, 12, and 14, lies in the protection of the proper functioning of the Union market, which must operate "under conditions of neutrality and free price formation,” and that this purpose is complemented by that of health protection.

It then draws attention to the fact that the national legislator configured, with Article 39-octies, paragraphs 6, 7, and 8, of Legislative Decree no. 504 of 1995, as amended, a method of applying the MFB characterized by an extremely high percentage (initially set at 96.22 percent from 2019, then further increased, as it amounts to 98.10 percent from 2023, 98.70 percent for 2024, and 98.80 percent from 2025), to be automatically applied to the sum of the total excise duty and VAT, calculated with reference to the "Cigarette WAP.”

According to the referring court, it is the method of implementation and regulation of the MFB, "in its overall operation,” i.e., in light of the provisions contained in paragraphs 6, 7, and 8 of Article 39-octies of Legislative Decree no. 504 of 1995, read according to their overall "scope,” that causes the incompatibility of the national provision with the Directive and with the general principles contained therein.

In fact, the following are violated: Article 7, paragraph 3, of Directive 2011/64/EU, because, by aligning the prices of low-end cigarettes with those of the mid-range, the economic effect is produced that the selling prices do not reflect manufacturers’ transfer prices; Article 7, paragraph 2, of the same Directive, because, in the national system, the total excise duty applied for the calculation of the MFB is decreasing from the minimum to the average level of cigarette prices, instead of varying proportionally to the price; Article 7, paragraph 4, of the same Directive, because the MFB was introduced automatically, linked to an ever-increasing percentage of the rate to be applied, without any connection to the purpose of protecting human health and the competitive regime of the Union market.

The referring court also points out that none of the provisions of the Directive, which Judgment no. 220 of 2023 required it to examine and assess, could justify the national legislator’s choice to configure and calculate the MFB according to what is provided for by the provisions suspected of constitutional illegitimacy.

2.‒ The objection of inadmissibility raised by the State defense, based on the argument that the TAR Lazio, in reformulating the questions of constitutional legitimacy, did not carry out any specific analysis and assessment of the provisions contained in the Directive to which Judgment no. 220 of 2023 referred, is unfounded.

The defect of inadmissibility of a question of constitutional legitimacy can, in fact, be remedied by the referring court if it proceeds to fill the gaps previously found (Judgment no. 279 of 2014).

This Court, with the already cited Judgment no. 220 of 2023, declared the questions, which the same TAR Lazio had raised, inadmissible "due to an incomplete reconstruction of the reference regulatory framework,” because several provisions, contained in the recitals and articles of Directive 2011/64/EU, which should have been considered in order to motivate the doubts of Union compatibility and constitutional illegitimacy regarding the relationship between the MFB and the ‘Cigarette WAP’ established by the challenged national provisions, remained ignored.

With the order of reference now under consideration, the TAR Lazio, as stated, takes them into account and specifically illustrates the Union regulatory framework of reference, clarifying, also in relation to the previously unaddressed provisions, that the national legislation conflicts with it.

Therefore, the reasons that led this Court, with Judgment no. 220 of 2023, to declare the questions inadmissible are overcome.

3.‒ The questions are, however, inadmissible, because, despite evident critical issues, the *reductio ad legitimitatem* sought by the referring court can only fall, in the first instance, to the legislator, given the plurality of solutions suitable for the purpose, which imply diversified system choices.

To understand this conclusion, it is useful to first outline a brief reconstruction of the complex evolution that characterized the national regime for taxing tobacco products, and cigarettes in particular.

3.1.‒ It is useful to start, for this purpose, from the moment when the legislator, with Article 1, paragraph 486, of Law of December 30, 2004, no. 311, concerning "Provisions for the formation of the annual and multi-year State budget (Finance Law 2005),” introduced for the first time a minimum price for the sale of cigarettes.

This measure did not pass unchallenged through the scrutiny of the Court of Justice of the European Union (Third Chamber, Judgment of June 24, 2010, Case C-571/08, European Commission), which found a conflict with Article 9, paragraph 1, of Council Directive 95/59/EC of November 27, 1995, on taxes other than turnover tax which affect the consumption of manufactured tobacco, in force at the time.

The judgment highlights, in fact, that "[a] legislation that imposes such a minimum price is therefore capable of harming competitive relationships, preventing some of these producers or importers from taking advantage of lower cost prices to offer more attractive retail selling prices.”

Regarding the needs for public health protection, which, in abstract, could justify the minimum price regulation, the Court of Justice, moreover, clarified that this objective "can be adequately pursued by increasing the excise duty on these products, since increases in excise duties must sooner or later translate into an increase in retail selling prices, without thereby compromising the freedom to determine the price.”

3.2.‒ The national legislator intended to follow up on this judgment by pursuing a twofold perspective, focused, this time, on the different aspect of taxation.

Firstly, with Article 4, paragraph 5, of Legislative Decree of March 29, 2010, no. 48 (Implementation of Directive 2008/118/EC concerning the general arrangements for excise duty and repealing Directive 92/12/EEC), it abolished the provision relating to the minimum price and, with Article 1, paragraph 1, letter nn), of the same Decree, provided for the insertion, among others, of Article 39-quinquies, paragraph 2, into Legislative Decree no. 504 of 1995, thereby establishing a different criterion for determining excise duty on cigarettes, based on the notion of the most popular price category (MPPC).

Secondly, with Article 55, paragraph 2-bis, letter c), Decree-Law of May 31, 2010, no. 78 (Urgent measures regarding financial stabilization and economic competitiveness), converted, with amendments, into Law of July 30, 2010, no. 122, enacted a few months after Legislative Decree no. 48 of 2010 came into force, it significantly modified the method of taxing cigarettes, on the one hand, leaving taxation unchanged for "high-end” cigarettes, i.e., those sold at a price equal to or higher than that of the most popular price category, and, on the other hand, for "low-end” cigarettes, it provided, by amending paragraph 4 of Article 39-octies of Legislative Decree no. 504 of 1995, that "[t]he base amount referred to in paragraph 3 constitutes, to the extent of one hundred and fifteen percent, the excise duty due for cigarettes having a retail selling price lower than that of the cigarettes in the most popular price category referred to in Article 39-quinquies, paragraph 2.”

In this way, the minimum price was replaced by a fiscal measure, namely the disincentivizing minimum excise duty (equal to 115 percent of the excise duty applicable to the most popular price category).

3.3.‒ Even this regulatory intervention was, however, challenged by the Court of Justice, this time for violating Directive 2011/64/EU, which replaced the previous one.

The Court of Justice, Fifth Chamber, with Judgment of October 9, 2014, Case C-428/13, Ministero dell’economia e delle finanze and Amministrazione autonoma dei monopoli di Stato (AAMS), in fact specified that "the application of tax thresholds that vary according to the characteristics or price of cigarettes would lead to distortions of competition between the different cigarettes and would therefore be contrary to the objective of guaranteeing the proper functioning of the internal market and neutral competition conditions pursued by Directive 2011/64.”

According to the CJEU, "[t]his is precisely what happens with the regulation at issue in the main proceedings, which provides for the levying of an excise duty, set at 115% of the excise duty applicable to the most popular price category, only on cigarettes with a selling price lower than that of the cigarettes in the most popular price category.”

Therefore, the judgment clarified that "[a]rticles 7, paragraph 2, and 8, paragraph 6, of Directive 2011/64/EU […] must be interpreted as meaning that they preclude national legislation, such as that at issue in the main proceedings, which establishes not a minimum excise duty identical for all cigarettes, but a minimum excise duty only on cigarettes with a retail selling price lower than that of the cigarettes in the most popular price category.”

3.4.– Following the aforementioned judgment, the national legislator intervened again and, with Article 1, paragraph 1, letter d), of Legislative Decree of December 15, 2014, no. 188 (Provisions regarding the taxation of manufactured tobacco products, their substitutes, as well as matches, pursuant to Article 13 of Law of March 11, 2014, no. 23), introduced a different configuration of the taxation structure, centered on the provision of an MFB.

3.5.‒ In particular, with specific reference to the amount of the latter, initially paragraph 6 of Article 39-octies of Legislative Decree no. 504 of 1995 – in the text resulting from the amendments made by the aforementioned Article 1, paragraph 1, letter d), of Legislative Decree no. 188 of 2014 – had determined it in the fixed amount of "euro 170 per conventional kilogram,” i.e., per 1000 cigarettes.

3.6. ‒ After the introduction of the MFB mechanism under Legislative Decree no. 188 of 2014, four further legislative changes occurred, specifically:

– Article 1, paragraph 1074, of Law no. 145 of 2018;

– Article 1, paragraph 659, of Law no. 160 of 2019;

– Article 1, paragraph 122, of Law no. 197 of 2022;

– Article 1, paragraph 48, letter a), number 3), of Law no. 213 of 2023.

The common feature of these provisions, besides the confirmation of the MFB, lies in the modification of its calculation method.

In particular, pursuant to Article 1, paragraph 1074, of Law no. 145 of 2018, the MFB is no longer established in a fixed amount by the legislator but is indexed, as it has become a percentage, initially equal to 95.22 (then, as a result of the provisions of Laws no. 160 of 2019, no. 197 of 2022, and no. 213 of 2023, it was raised, respectively, to 96.22 from 2019, to 98.10 from 2023, to 98.70 from 2024, and to 98.80 from 2025) of the sum of the total excise duty, calculated with reference to the "Cigarette WAP.”

3.7.‒ Thus, the calculation system for the MFB has shifted from one based on a numerical choice by the legislator to a methodology based on automatic updating, which relates to the "Cigarette WAP.”

The latter, pursuant to Article 39-quinquies, paragraph 2, of Legislative Decree no. 504 of 1995, is "determined annually by March 1st of the following calendar year, based on the ratio, expressed in euros with truncation of decimals, between the total value, calculated with reference to the selling price including all taxes, of cigarettes placed on the market in the preceding calendar year and the total quantity of the same cigarettes.”

3.8.‒ Article 1, paragraph 659, of Law no. 160 of 2019, then, limited itself to intervening on paragraph 6 of Article 39-octies of Legislative Decree no. 504 of 1995, modifying the MFB percentage, which became equal to 96.22 percent of the sum of the total excise duty and the value-added tax calculated with reference to the "Cigarette WAP.”

3.9.‒ Article 1, paragraph 122, of Law no. 197 of 2022 finally modified and increased the amount of the specific excise duty, providing, in paragraph 3, letter a), of Article 39-octies of Legislative Decree no. 504 of 1995, as substituted, that "[f]or cigarettes, the amount of the excise duty is constituted by the sum of the following elements: a) a fixed specific amount per unit of product, determined, for the year 2023, at 28 euros per 1,000 cigarettes, for the year 2024 at 28.20 euros per 1,000 cigarettes and, from the year 2025, at 28.70 euros per 1,000 cigarettes.”

The ad valorem excise duty from Article 39-octies, paragraph 3, letter b), also as substituted, was defined as "[a]n amount resulting from the application of the base rate, referred to in the heading ‘Manufactured Tobacco,’ letter c), of Annex I, to the retail selling price.”

Paragraph 4 of Article 39-octies (which provided for the calculation of the total excise duty) was repealed, while the notion of total excise duty, as the sum of the two components, fixed and proportional, recalled in the MFB determination mechanism, remained, which was thus determined in paragraph 6 of the same Article: "[f]or manufactured tobacco products referred to in Article 39-bis, paragraph 1, letter b) (cigarettes) the minimum fiscal burden, referred to in Article 7, paragraph 4, of Council Directive 2011/64/EU of June 21, 2011, shall be equal, for the year 2023, to 98.10 percent of the sum of the total excise duty constituted by the two components referred to in letters a) and b) of paragraph 3 of this Article and the value-added tax calculated with reference to the "Cigarette WAP”; the same percentage is determined at 98.50 percent for the year 2024 and at 98.60 percent from the year 2025 onwards.”

The *ius variandi* was provided exclusively for the calculation of the specific excise duty, but not for the MFB determination, which thus continues to depend on a (high) percentage, established from time to time by the legislator, substantially related to the "Cigarette WAP.”

Finally, with Article 1, paragraph 48, letter a), number 3), of Law no. 213 of 2023, paragraph 6 of Article 39-octies of Legislative Decree no. 504 of 1995 was amended, further increasing the measure of the percentage to be applied for the purpose of calculating the MFB, determining it "at 98.70 percent for the year 2024 and at 98.80 percent from the year 2025 onwards.”

4.‒ The current MFB determination mechanism presents evident critical issues with reference to the principle of proportionality, as it excessively and unnecessarily compresses the freedom of price determination that Directive 2011/64/EU grants to cigarette producers.

It is true that, as noted by the State Attorney's Office, the Directive, in several points, refers, for the calculation of excise duty on cigarettes, to the "Cigarette WAP” (in particular, in Articles 8, paragraph 4, and 10, paragraph 2, and in Recital no. 14); it also recognizes the possibility for Member States to introduce the MFB, which it specifically refers to – without expressly detailing the concrete methods by which it can be made operational – in Article 7, paragraph 4; finally, the Directive also gives relevance to the need to ensure "a high level of health protection, as required by Article 168 of the Treaty on the Functioning of the European Union, taking into account that tobacco products can seriously harm health” (Recital no. 2).

However, these provisions must be interpreted in light of the objectives pursued and taking into account the specific balances established by the Directive itself.

The latter, in fact, recognizes a non-marginal relevance to the need that "competition conditions are not distorted” (Recital no. 3), which "imply a pricing system that is freely formed for all groups of manufactured tobacco products” (Recital no. 10).

Consistent with this purpose of the Union discipline is, firstly, the provision of Article 7, paragraph 3, of the Directive, according to which the same ratio must be ensured for cigarettes between the specific excise duty and the sum of the ad valorem excise duty and VAT, "so that the range of retail selling prices equitably reflects the gap in manufacturers' transfer prices,” as well as, secondly, that of paragraph 4 of the same Article, which specifies that the MFB must be applied "to the extent that it is necessary,” also requiring that "the mixed structure of taxation and the range of the specific excise duty component, pursuant to Article 8, are strictly respected.”

4.1.‒ With respect to this Union regulatory framework, to which the national legislator is required to conform, the current MFB calculation mechanism established by the challenged norms results – also in light of the principles already affirmed in this regard by the Court of Justice and strongly oriented toward ensuring the proper functioning of the internal market – in an excessive compression of the needs for competition protection.

Regarding the mechanism of indexing to the "Cigarette WAP” – whereby the MFB is automatically redetermined each year, administratively by resolution of the Director of Customs and Monopolies, based on the selling price of cigarettes for the previous year – it is not, in fact, possible to exclude the risk highlighted by the referring court, namely that, in an oligopolistic market such as the Italian one, the MFB amount ends up being conditioned by the price increase caused by multinationals that dominate the high-end market; this reflects to the detriment of producers of low-end cigarettes, all and individually burdened by the same amount as MFB, while high-end ones, exceeding the so-called parity price – i.e., the price bracket beyond the MFB – remain subject to the ordinary excise duty in proportion to the retail selling price.

Furthermore, the level of adjustment to the "Cigarette WAP” has been set at an extremely high percentage, which has been progressively increased by law: from the 95.22 originally provided for 2019, to 96.22 percent in 2020, to 98.10 percent in 2023, to 98.70 percent in 2024, to 98.80 from 2025.

The combination of these two factors (indexing to the "Cigarette WAP” and the progressive increase in the rate percentage to be applied, which involves a notable approach of the MFB to the "Cigarette WAP”) subjects a growing segment of the cigarette market to the MFB regime. In other words, the growth of the ratio between the MFB and the "Cigarette WAP” excessively pushes low-end producers to increase their prices to safeguard their revenues, while allowing high-end producers to also raise their prices without losing competitiveness: thus, the "Cigarette WAP” increases and, given the indexing to the latter, the MFB also increases further, triggering a self-reinforcing circular effect.

In this way, the penalization of low-end producers denounced by the referring order and documented by the parties occurs.

This is a disproportionate and unnecessary effect with respect to the purpose for which Directive 2011/64/EU permitted the introduction of the MFB, which is to safeguard health, by preventing excessively low prices from encouraging consumption, especially among the most exposed segments of the population, such as young people.

The challenged mechanism, in fact, triggers an automatism that tends to self-feed, drastically impacting the profit margin of cigarettes sold at a "low-end” price, i.e., below the "parity price,” with a protective effect for the "high-end” that strongly unbalances, to its prejudice, the objective of protecting competition compared to that, equally pursued by the Union legislator, of protecting health.

4.2.‒ However, the *reductio ad legitimitatem*, as stated, cannot be carried out by this Court. The ways in which this could be done are in fact multiple, as well as expressive of different system choices, and are entrusted in the first instance to the discretion of the legislator.

The range of possible options spans from the solution – toward which the current draft "State Budget for the financial year 2026 and multi-year budget for the three-year period 2026-2028,” presented by the Minister of Economy and Finance, is effectively directed, with Article 28, paragraph 1, letter a), number 3), aligning with the choice already made, at the time, by Legislative Decree no. 188 of 2014 – to return to determining the MFB, starting from 2026, in a numerical amount (referring to the quantity of one conventional kilogram of cigarettes) established directly by the primary norm, thus eliminating automatisms, and that of significantly reducing the percentage provided for the MFB; both these solutions can, moreover, be declined according to a wide range of possible variables within each of them.

Stating that the concrete determination of the MFB must be informed by criteria of proportionality and balancing of the aforementioned objectives pursued by the Directive, the vast field of possible, and necessary, solutions therefore determines the inadmissibility of the raised questions, since the remedy for the defect found requires, in reality, "a systemic legislative intervention, implying fundamental choices between options all falling within the discretion of the legislator (judgments no. 71 of 2023, no. 96 and no. 22 of 2022, no. 259, no. 240, no. 146, no. 103, no. 33, and no. 32 of 2021)” (Judgment no. 190 of 2023).

for these reasons

THE CONSTITUTIONAL COURT

declares inadmissible the questions of constitutional legitimacy of Article 39-octies, paragraphs 6, 7, and 8, of Legislative Decree of October 26, 1995, no. 504 (Consolidated Text of legislative provisions concerning production and consumption taxes and related criminal and administrative sanctions), as amended by Article 1, paragraph 1074, of Law of December 30, 2018, no. 145 (State Budget for the financial year 2019 and multi-year budget for the three-year period 2019-2021), by Article 1, paragraph 659, of Law of December 27, 2019, no. 160 (State Budget for the financial year 2020 and multi-year budget for the three-year period 2020-2022), by Article 1, paragraph 122, of Law of December 29, 2022, no. 197 (State Budget for the financial year 2023 and multi-year budget for the three-year period 2023-2025), as well as by Article 1, paragraph 48, letter a), number 3), of Law of December 30, 2023, no. 213 (State Budget for the financial year 2024 and multi-year budget for the three-year period 2024-2026), raised, with reference to Articles 11 and 117, first paragraph, of the Constitution, in relation to Article 7, paragraphs 2, 3, and 4, of Council Directive 2011/64/EU of June 21, 2011, concerning the structure and rates of excise duty applied to manufactured tobacco, Article 101 of the Treaty on the Functioning of the European Union, as well as Article 4 of the Treaty on European Union, by the Regional Administrative Court for Lazio, Second Section, with the order indicated in the preamble.

Decided in Rome, at the seat of the Constitutional Court, Palazzo della Consulta, on November 18, 2025.

Signed:

Giovanni AMOROSO, President

Luca ANTONINI, Rapporteur

Roberto MILANA, Director of the Registry

Filed in the Registry on December 9, 2025