Proposed changes to tobacco taxation could lead to increases of at least 80% in Cyprus, Greece, Hungary and Bulgaria, as the issue is set to feature on the agenda of the ECOFIN meeting on 9 November.
The proposed revision aims to update existing tobacco taxation rules, support public health objectives and align fiscal policy with current market developments, according to a briefing note.
The plans would raise minimum excise duty rates across the EU and extend the rules to cover additional tobacco and nicotine products.
EU plans target higher minimum tax rates
Behind the stated public health objectives, the proposals also seek to generate additional revenue for the EU budget through higher tobacco taxes, with northern European countries reportedly among the main supporters of the changes.
The proposed increases would involve raising minimum excise duty rates across member states and extending taxation to newer products, including electronic cigarettes, heated tobacco and nicotine pouches.
Greece has opposed the proposals from the outset, seeking transitional periods to avoid a sudden financial burden on consumers. It has also called for additional safeguards to prevent a rise in tobacco smuggling.
If excise duties are adjusted to the levels proposed by Brussels, the price of a packet of some of the most popular cigarette brands in Greece could rise from €4.80 to €6.50.
Three main areas of proposed changes
The planned revision focuses on three main areas:
Higher minimum tax rates
The EU aims to reduce differences between the excise duty rates applied by member states by adjusting minimum rates according to each country’s economic conditions and general price levels.
According to the European Commission, smoking rates across Europe are not declining quickly enough to meet the targets of the EU’s Beating Cancer Plan, which aims to reduce tobacco use to below 5% of the population by 2040.
Smoking prevalence in the EU currently stands at 24%.
New products brought under the rules
The proposed directive would also cover additional products, including electronic cigarettes, heated tobacco and nicotine pouches.
These products would be subject to new minimum tax rates, with the Commission expecting higher taxation to make them less attractive as alternatives to traditional tobacco products.
Stronger controls on raw tobacco
The proposals also seek to strengthen controls on unprocessed tobacco, which can be diverted into illegal supply chains.
The EU’s existing electronic system for recording and monitoring the movement of excise-duty products within the bloc would be extended to raw tobacco. This is intended to help member states identify and combat the illegal tobacco trade more effectively.
Cyprus among countries facing significant increases
A study prepared by the European Parliament found that, although tobacco taxes have increased significantly across all EU member states since the Tobacco Products Directive was introduced in 2014, the scale of the increases has varied considerably.
Bulgaria, Hungary and Greece remain only slightly above the EU minimum requirement of €90 per 1,000 cigarettes.
By contrast, northern and western European countries have already introduced significant increases in tobacco product prices since 2014.
The expected tax increases of at least 80% in Cyprus, Greece, Hungary and Bulgaria are intended to narrow price differences between northern and southern Europe and bring taxation levels closer together.
The proposed changes are expected to be discussed by EU finance ministers at the ECOFIN meeting on 9 November.
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