The EU has been pushing to increase tobacco taxes around the bloc for years now, although it has failed to get unanimous approval from the member states. Now, with the new idea of turning additional tobacco taxes into the EU’s own revenue to bolster its radically increased €2 trillion budget from 2028, the topic is back on the agenda with full force.
According to the EU Commission’s 2024 proposal to revise the Tobacco Excise Duty Directive (TED)—which could still change during the budget negotiations—would see a 139% increase in cigarette taxes, from the current €90 to €215 per 1,000 units.
In addition, rolling tobacco would see a 258% increase in taxes to be on par with pre-packed cigarettes; the tax on cigars and cigarillos would be increased by 1000% (but still less than cigarettes); while next generation products (NGPs) that were not subject to TED previously, such as heated tobacco, nicotine pouches, and e-liquids, would be put under the central taxation system for the first time as well.
Since the TED rules are tied to the average EU tax on tobacco, countries that already have higher taxes would be exempt from the mandatory hikes. These include France, Belgium, the Netherlands, Finland, and Ireland, where tobacco prices are already the highest in Europe.
According to the calculations of Euractiv, all the other EU countries would see a price increase for cigarettes by an average of 18.6% or €0.93, with the poorer member states in Southern and Eastern Europe, where cigarettes are still relatively cheap at the moment, being affected the most.
The largest increase will affect smokers in Bulgaria, where a nearly €2 additional tax per pack would mean a 60% increase in total prices. Next up is Greece (38%), Croatia (36%), Slovenia (32%), Portugal (24%), and Italy and Slovakia with 23%.
The €1-€2 per pack may not seem too much, but in practice, this would mean that smokers who go through a pack a day would face an additional annual cost of €645 in Bulgaria, €545 in Greece, and €415 in Italy.
In recent years, a coalition of 15 member states has been pushing for a mandatory increase of tobacco taxes for health reasons, arguing that it’s the most effective way to reduce tobacco consumption.
At the same time, the tobacco industry and the hesitant member states are not only skeptical of the disincentivizing effect of raising taxes, but also warned about the potential risk of creating and expanding black markets, which would cause the governments to lose tax revenue instead of gaining more.
“The Commission’s approach overlooks real-world evidence: high excise rates have shown little success in reducing smoking prevalence, fuelled illicit trade, negatively impacted MS revenues, and impoverished EU consumers,” Cyril Lalo, the Head of EU Engagement at Imperial Brands told europeanconservative.com.
While the industry welcomes the tax harmonization efforts for NGPs, the top lobbyist pointed out that it’s a mistake to treat them as the same as traditional cigarettes.
For example, setting the minimum tax rate for nicotine pouches more than six times higher than in Sweden, where they are primarily sold, fails to acknowledge the distinct characterization of this category. Similarly, the proposed nicotine-based taxation model for e-liquids doesn’t take into account that transitioning users initially need higher levels of nicotine just to feel the same effect.
These approaches would be counterproductive to harm reduction efforts while simultaneously pushing the black market to expand toward NPGs, along with regular cigarettes, Lalo said.
When the EU Commission is talking about its hope to rake in an additional €11.2 billion of “own revenues” annually through these taxes, it overlooks “substantial” tax losses that we already see in high-excise countries such as France and the Netherlands, where contraband and counterfeit products are replacing legal sales, he added.
“The Commission appears to overemphasize the role of illegal supply in driving illicit trade, while underestimating the primary influence of price—an element that would be significantly impacted by the proposed new minimum rates,” Lalo explained.
