The European Union aspires to be a smoke-free generation by 2040. To achieve this, Ursula von der Leyen’s government considers taxes to play a key role. They rely on a study that estimates a 40% impact of cigarette taxes on reducing tobacco consumption. However, the European Parliament does not yet have a position that allows progress on a tax increase that has not been updated since 2011.
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Neither the minimum rates required by Brussels nor inflation have contributed to equalizing tobacco taxes in the EU. According to the latest available data, compiled by the Tax Foundation, a think tank that analyzes tax data from the United States and Europe, Ireland pays 10.7 euros in excise taxes (excluding VAT), Bulgaria 2 euros, and Spain 3.13 euros on each purchase of a pack of 20 cigarettes.
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Member States have the freedom to set national excise tax rates as they see fit, provided the minimum rates are respected. Currently, this means that taxes must account for at least 60% of the price consumers pay when buying a pack, and this cannot be less than 90 euros per 1,000 cigarettes. Based on these criteria, each country sets its rates.
It is not only an economic issue. If price data is compared with the number of smokers per country, a clear relationship is seen between lower prices and higher consumption. 37% of Bulgarian citizens over 15 years old smoke daily, according to the latest Eurostat data; it is the country with the highest incidence of smoking. In Ireland, the figure drops to 16%. The countries with the lowest cigarette consumption are Sweden (8%) and the Netherlands (11%). Spain (24%) is around the average. There are also some exceptions. Luxembourg, with an indirect tax of 3.18 euros per pack, has a smoking rate of 19%.
With this data, the European Commission wants to raise taxes for several reasons. The first is health-related, to reduce smoking among Europeans. The second is economic. Brussels aims to generate more community revenue through tobacco taxes. This would be one of the own resources that the community executive has included in the budget proposal for the years 2028-2034. The effective date coincides with that of the tobacco taxation directive that Brussels must agree with the Council and on which it requested the opinion of the European Parliament.
In addition to increasing the percentage that these taxes must represent on the price, the Commission adds to the proposal taxes for new devices: vapes and electronic cigarettes.
The European Commission wants to raise taxes
The Parliament committee responsible for evaluating the proposal, the Economic Affairs Committee, brought a report to the plenary advocating lowering the European executive’s proposal, since the MEPs, led by the European People’s Party (EPP) and the Patriots for Europe, considered that raising prices would increase the illegal trade of these products. The Parliament’s opinion is, in this case, only advisory, since as it is a directive on taxation, the Member States have the decision-making power.
The 27 have not yet reached an agreement, but they have debated the Commission’s proposal. In meetings on the matter, several European capitals have requested transition periods for a tobacco tax increase. Countries believe that the Von der Leyen executive’s proposal should take into account differences in purchasing power between countries. At the same time, they consider that these differences may lead to cross-border purchases between states with large price differences, as currently occurs between Luxembourg and Belgium.
Without a consolidated opinion and with the debate still open, EU finance ministers hope the Commission will propose formulas to renew these taxes recurrently to avoid another 15 years until the next update.
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