By Timothy S. Donahue

Top Takeaways:

• Deal Blocked: Malta withheld support for the revised Tobacco Taxation Directive despite backing from the other 26 EU member states.
• Pouch Taxes Unsettled: A Nov. 5 proposal outlined phased minimum taxes beginning in 2028, but ministers subsequently considered deferring the rate decision.
• Talks Continue: Ireland’s Council presidency intends to seek an agreement in Dec. before Lithuania assumes the presidency in Jan.

Twenty-six countries said yes. Malta said no. Europe’s tobacco tax overhaul will have to wait.

European Union finance ministers failed to reach agreement on the revised Tobacco Taxation Directive at their November 9 meeting in Brussels, leaving proposed EU-wide minimum excise duties for nicotine pouches, vaping liquids, and heated tobacco products unresolved.

Malta was the sole remaining holdout after Finland and Estonia, which had earlier objected to the negotiations, accepted additional compromises proposed by Ireland, which holds the rotating presidency of the Council of the EU.

The directive requires unanimous approval by all 27 member states. “We have an agreement of 26, which is a tremendous achievement,” Irish Finance Minister Simon Harris said following the meeting.

Harris expressed frustration that ministers had failed to finalize a package to modernize tobacco taxation rules, which have remained largely unchanged since 2011. “I regret that the Council could not come to a final agreement on the revision of the tobacco tax directive today,” Harris said in a statement published by the Council.

He said the presidency would continue working with the remaining holdout but would not reopen negotiations on the full package.

The proposed directive would increase minimum excise duties on conventional tobacco products and, for the first time, establish harmonized EU minimum rates for nicotine pouches, e-liquids, and heated tobacco products.

The Irish presidency’s November 5 compromise, detailed in Council document 15387/26, proposed a phased approach to taxing nicotine pouches.

Under that text, minimum excise duties would take effect on January 1, 2028, at 10% of the retail selling price or €30 per kilogram, whichever yields the higher tax. The minimum would increase to 25% or €40 per kilogram in 2030 and to 50% or €50 per kilogram in 2032.

The proposed €50-per-kilogram minimum was about 65% lower than the European Commission’s original €143-per-kilogram proposal, although the 50% retail-price component remained unchanged.

However, negotiations continued at the November 9 meeting. In a further attempt to secure agreement, Harris proposed bringing nicotine pouches under the harmonized EU excise framework while postponing the decision on their exact tax rates.

That approach would have separated agreement on whether nicotine pouches should be covered by the directive from the politically contentious question of how heavily to tax them. The additional compromise helped overcome Finland’s objections. Estonia also accepted changes to the proposed mechanism for adjusting minimum excise duties.

Malta, however, refused to approve the overall package.

Maltese Finance Minister Clyde Caruana said the country supported the legislation’s objectives but remained concerned about the impact of higher minimum taxes and restrictions on national flexibility.

“The proposed minimum rates remain well above current national levels, notwithstanding the latest changes related to nicotine pouches,” Caruana said, warning that the increases could have “disproportionate effects in Malta.”

Malta also objected to provisions linking minimum excise rates to inflation and to differences in national price levels, arguing that these mechanisms did not provide sufficient flexibility for individual countries.

Sweden, which had previously opposed the proposed minimums for nicotine pouches, did not block the final compromise.

The proposed harmonization has significant implications for nicotine pouch manufacturers and distributors. Currently, member states apply different national tax arrangements, with some imposing specific excise duties on pouches and others imposing no equivalent tax.

Supporters of harmonization argue that common minimum rates would reduce disparities across national markets and limit opportunities for cross-border tax avoidance.

The Global Institute for Novel Nicotine (GINN) supports harmonized EU taxation but has argued that excise duties should reflect differences in product risk and preserve financial incentives for adult smokers to switch away from combustible cigarettes.

The organization’s concerns center on the proposed 50% retail-price minimum starting in 2032, which it argues could narrow the tax advantage of smoke-free nicotine products.

The financial implications could be substantial in markets like Sweden.

According to calculations by the Swedish nicotine pouch price-comparison website Snusjakten.se, the November 5 per-kilogram proposal would add approximately SEK 1.95 (€0.18) to the retail price of a typical 13.6-gram can in 2028, assuming full pass-through of the additional tax and including Sweden’s 25% VAT.

Under the per-kilogram calculation, the estimated increase would reach SEK 3.78 (€0.35) in 2030 and SEK 5.62 (€0.52) in 2032. Actual costs could differ because the proposed retail-price percentage could result in a higher minimum tax.

Those calculations illustrate the potential impact of the published compromise, not of a tax schedule approved by the Council.

The European Commission maintains that extending harmonized excise duties to newer nicotine products would support public health objectives, address disparities among member states, and strengthen the EU’s internal market.

Harris said Ireland would continue negotiations with Malta and other member states in hopes of reaching an agreement at the December ECOFIN meeting.

If an agreement is not reached by the end of December, responsibility for advancing the directive will transfer to Lithuania when it assumes the rotating Council presidency in January 2027.