The European Commission wants to harmonise tobacco taxation across the Union — including on products such as e-cigarettes and vapes. But experts and parliamentarians warn that the plan may place a disproportionate burden on economically weaker countries, fuel the illicit tobacco trade, and blur the boundaries between taxation policy and the Commission’s own financial vitality.
The proposal to revise the Tobacco Taxation Directive (TTD) represents the most substantial update to the EU’s excise framework in nearly 15 years. With this revision, the Commission aims to raise minimum tobacco tax rates across member states to reduce the stark disparities in retail prices which, it argues, distort the internal market. For example, a 20-pack of cigarettes costs €18.94 in Ireland but €3.69 in Bulgaria. Under the proposal, the minimum excise rate for cigarettes would rise by 139% — from the current €90 per 1,000 units to €215 per 1,000 units. According to the Commission, the existing framework, last updated in 2010, no longer supports internal-market coherence. While reducing smoking prevalence is also an objective, officials from the Commission’s tax department (TAXUD) stressed that the revision is primarily tax-driven, not a health measure.
Disparity Concerns
Industry representatives and several MEPs warn that the impact of such a rise would be uneven. Economically stronger countries such as Belgium, Finland, France, the Netherlands and Ireland — which already tax tobacco well above EU averages — would see no change. But in lower-income member states, prices could rise by €1–€2 per pack. Bulgaria, which has the EU’s highest smoking rate, would experience the steepest increase: nearly 60 per cent.
Christa Pelsers, Chair of the Fiscal Affairs & Anti-Illicit Trade Working Group at Tobacco Europe, was one of the industry voices sharing her insights. She warned that thi hike will hit consumers in lower-income member states the hardest, and many would likely turn to illicit products or cheaper substitutes. In her view, higher taxes would not necessarily lead to smoking cessation but would instead drive consumers toward the black market.
Recent data suggest this risk is not merely theoretical. Europe’s Anti-Fraud Office (OLAF) reported that authorities seized 616 million illegal cigarettes in 2023 — an increase of more than 60 million compared to the previous year. Notably, around 140.6 million of these were of EU provenance. Another study, commissioned by Philip Morris International, estimated that 39.8 billion illicit cigarettes were consumed in the EU in 2024, a 10.8 per cent rise from 2023. The tobacco giant has consistently used the risk of fuelling the illicit market as an argument against steep tax hikes in Europe, which negatively affect its business.
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Public health and tax policy
Professor Fabrizio Moscone, Professor of Public Finance at Ca’ Foscari University of Venice and a self-proclaimed “proud non-smoker,” argued that taxation should not be viewed purely as a fiscal tool but as part of a broader public-health strategy. He echoed concerns about disproportionate impacts on low-income populations and the potential for a growing illicit trade. To mitigate these effects, Mr Moscone proposed that alternative, less harmful nicotine products — such as e-cigarettes and snus (a smokeless tobacco product sold in small pouches) — should not be taxed at the same level as combustible tobacco. Tax differentiation, he said, can encourage smokers to switch and yield long-term health benefits, as well as reduce health-related societal costs.
That argument was firmly challenged by Gijs van Wijk, Policy Officer at Smoke Free Partnership, an alliance of tobacco-hating NGOs. He warned that new nicotine products are often “entry points for youth” and should not “escape taxation simply because they are new”. He stressed the need to insulate health policy from industry-funded research and maintained that regulation of novel nicotine products should follow a precautionary approach.
Fiscal autonomy
Another concern raised during the hearing was the potential encroachment on national authority over tax policy. Ms Pelsers argued that the Commission’s projection of €14bn in additional excise revenue as a result of increased taxes is “a myth”. Several member states—including Romania, Lithuania and Bulgaria—have expressed reservations about both the social impact and the implications for national fiscal sovereignty, she said.
Other objections have emerged as well. MEP Marco Falcone (EPP/ITA) warned that giving the Commission the power to adjust key elements of the directive every three years risks undermining member states’ autonomy over sensitive tax matters.
Consumers in lower-income member states would be hit hardest, and many would likely turn to illicit products. — Christa Pelsers, fiscal affairs chair at Tobacco Europe
In that regard, Fernand Kartheiser (NI/LUX) referred to a controversial part of the Commission’s long-term budget proposal: the Tobacco Excise Duty Own Resource (TEDOR), which would channel 15 per cent of national revenue from the sales of tobacco and tobacco-related products to the Commission. This would generate an estimated €11.2bn of extra budget income. Mr Kartheiser argued that the Commission is effectively positioning tobacco excise as a future EU revenue stream, calling this an “overreach” into national tax competence. In his view, using excise reform to strengthen the EU’s financial health is unacceptable. The Commission should abandon any linkage between the TTD and new own-resource proposals.
Global competitiveness
Some MEPs also tied the debate to questions of competitiveness. Denis Nesci (ECR/ITA) warned that the proposal risks giving non-EU producers a competitive advantage. Gaetano Pedullà (Left/ITA) echoed that concern, noting that destabilising the tobacco industry could harm European competitiveness. This is especially worrying as companies have built their business in Europe based on the taxation framework known to them.
However, Ms Pelsers welcomed the recent revision of the EU Customs Code, which removes the de-minimis threshold for low-value imports. This means that even very cheap goods shipped into the EU—such as disposable vapes bought online for a few euros—will no longer enter the market without customs checks or taxes, closing a loophole that many say has favoured non-EU sellers, particularly from China.
