By Timothy S. Donahue
Top Takeaways:
- Tax Increase: Cigar and cigarillo taxes will rise in 2027, but far less than initially proposed.
- Industry Relief: Manufacturers warned that steep increases threatened Germany’s cigar industry.
- Delayed Start: New cigar tax rates are expected to go into effect on March 1, 2027.
Germany’s cigar industry dodged a tax disaster. It still won’t escape a bigger bill.
The Bundestag approved revised tobacco tax legislation Oct. 15, substantially reducing proposed increases on cigars and cigarillos after manufacturers warned that the original plan could devastate the industry. The revised rates take effect March 1, 2027, two months later than initially planned.
Germany’s Federal Association of the Cigar Industry (BdZ) had warned that earlier proposals could increase cigar prices by 50% to 60%, threatening manufacturers, specialty retailers and approximately 1,600 collectively bargained jobs.
The association described the original proposal as having a potentially “strangling effect” on manufacturers and retailers, according to the Bundestag’s account of an Oct. 5 parliamentary hearing.
The revised legislation also increases taxes on cigarettes, heated tobacco, rolling tobacco, pipe tobacco, hookah tobacco and tobacco substitutes through 2030.
Lawmakers said the changes would ease the sharpest increases on cigars and pipe tobacco while preserving the government’s broader revenue and public health objectives. The Finance Committee estimated the amended legislation would generate approximately €1.5 billion in additional tobacco tax revenue in 2027.
The cigar industry had argued that excessive increases would threaten smaller manufacturers and encourage illicit trade. The final parliamentary compromise offers substantial relief, although cigar and cigarillo taxes will still rise.
