A coalition of 15 European Union member states, including Germany, France, Spain, and the Czech Republic, has urged the European Commission to expedite the revision of the bloc’s tobacco taxation directive, which has remained unchanged since 2011.
In a letter addressed to Commission President Ursula von der Leyen, the finance ministers of these countries emphasized the need to update the directive to address emerging products and market trends.
The ministers highlighted that the current directive is inadequate for managing the challenges posed by new tobacco and nicotine products, such as e-cigarettes, nicotine pouches and heated tobacco. They argue that the lack of harmonized taxation across the EU has led to market fragmentation and hampers efforts to combat tobacco fraud, which the European Anti-Fraud Office estimates results in over €10 billion in annual revenue losses.
“The current scope and provisions of the directive are insufficient to enable member states to deal with the significant challenges posed by ongoing developments and trends in the European tobacco market,” the ministers wrote.
The proposed revisions aim to establish minimum excise rates for novel products and significantly increase the minimum rates for traditional tobacco products, including cigarettes and cigars. A leaked draft from 2022 suggested potential increases of 100% for cigarettes, 200% for rolling tobacco, and 900% for cigars and cigarillos. However, the final proposal may differ.
Tax Commissioner Wopke Hoekstra has indicated support for revising the directive, citing health concerns and the need to address illicit trade. “The rules for tobacco taxation are no longer fit for purpose. We are considering working on a proposal to amend …,” the Commission stated.
The initiative requires unanimous approval from all EU member states. Countries like Italy, Greece, and Romania have expressed opposition, arguing that smoking rates are already declining and that a comprehensive overhaul is unnecessary. The nations are also significant tobacco producers.
The Commission had initially planned to propose the revisions in 2022 but delayed the initiative due to concerns about the impact of rising excise taxes amid high inflation. With inflation now reduced to 2.2% as of April, EU officials have indicated that a proposal is expected soon.
