It took a leak to learn what the European Commission intends for its tobacco products policy. On the 12th of June 2025, the German publication Bild obtained an unpublished Commission staff impact assessment report of the upcoming Tobacco Excise Directive. The newspaper revealed plans for significant increases in tobacco product prices.
EU minimum excise duties, or the “minima” in policy jargon, include cigarettes, fine-cut smoking tobacco, cigars, cigarillos, and other smoking tobacco goods. They all receive a per quantity or ad valorem (calculated using a fixed percentage of the average retail price) tax, whichever is higher. To illustrate, cigarettes are taxed at 90 euros per thousand sticks or 60% of the retail price, whereas other smoking tobacco goods are taxed at 20% of the retail selling price or 22 euros per kilogram.
Now, the European Commission is planning to tighten the screws on European smokers even more. The document reports increases in these rates of 94% for cigarettes, 24% for fine-cut products, and whole new levies for heated tobacco. If an average pack of cigarettes in the Bloc costs 9 euros, the change translates to a rise of 1 euro per regular pack and 70 euro cents for every vending pack. Even vapes are not spared, creating a larger excise duty equivalent to the one for tobacco products above, despite vapes not being tobacco products (rather, they are nicotine-based) and despite controversies over including vapes in the broader Tobacco Tax Directive.
Curiously, the Commission recognizes why their proposed excise tax regime would not work, only to brush the concerns aside. Annex 64 on page 57 states that “option 3 [the excise tax hike] could incentivize the illicit trade of tobacco products.” Despite acknowledging the black market activity its policies would unleash, it believes that a decrease in tobacco consumption among European consumers and increased revenues from these taxes would more than compensate for the problem.
The Commission could not be more wrong. The black market has already been expanding at an alarming rate. The year 2024 saw the largest number of illegal cigarettes traded since 2015, with more than 38.9 billion illicit sticks bought and sold across the Bloc, representing nearly 1 in 10 of all cigarettes. In the Netherlands, figures doubled last year to reach 1.1 billion in 2024, or 17.9% of total smoking. In France, they are equivalent to 37.6% of total cigarette use at 18.7 billion individual illegal goods, the single biggest illicit tobacco product sector in Europe. Belgium has tried the path recommended by the Commission, with steep taxes and strict regulations, and is paying the price in the form of a 13% growth in counterfeit and smuggled cigarettes, to a total of 1.30 billion units. Rates will only increase once the higher excise duties are in place and legal substitutes are set to become more expensive, with smokers turning to the illegal options in ever-growing numbers. That means more crime, less safety, and less revenue, a trade-off to the advantage of no one except tobacco smugglers.
Neither does an excise tax hike compensate for the rise in black market activity the way the Commission hopes it will. The report’s language claims: “The significant public health benefits of option 3, as well as the excise duty revenue generated, would largely compensate the expected impact on consumers and economic operators as well as the risks of rising illicit trade”.
It is worth pausing to realize that one cannot simultaneously achieve lower consumption rates and higher revenues. If it is true that excise taxes deter more people from smoking (as is the intention of most taxes in general), then one can expect far fewer people to smoke and thus no increase or even a decrease in earnings. If, on the other hand, there is an increase in revenues, that is because the same consumers are paying far more for identical products. The Commission expects the latter, with the most vulnerable people in less well-off EU member states like Bulgaria, Cyprus, Romania, and Malta being the ones to take the brunt of the taxes at a time when the cost-of-living crisis has not gone away.
The real solution to the EU’s predicament is the one path not taken – harm-reduction. While the EU aims for a modest slowdown in smoking rates from the current 24% to 20.8%, current trends are abysmal, set to drop by a mere 5% by 2100 if the current trend persists. By contrast, Greece has managed to cut figures down from 41% to 36% in the last six years, a remarkable feat for a state that had the highest smoking rates in Europe. Of course, Sweden remains the champion at 5.3%, on the verge of becoming the first smoke-free European country. Both states have openly embraced harm reduction, preferring to promote safer alternatives to smoking, like vaping, over the EU Commission’s approach.
The Commission should learn from both case studies: ineffective punishments and falsely equivalent rules and taxes between products with vastly different risk profiles do not work. To succeed, the new Tobacco Excise Directive should drop the secrecy and follow suit.
Originally published here
