Problems for the Tobacco Industry: EU Plans to Increase Excise Taxes on Cigarettes

Problems are coming from Brussels for all smokers. The European Commission is working on a proposal for a tax on cigarettes, as part of an increasing taxation of the tobacco industry, which is expected to double excise taxes in member states with low cigarette taxes.

Changes to the laws that are part of the European Commission’s plan to reduce smoking rates will increase the minimum excise tax in the European Union from €1.80 to €3.60 per pack of cigarettes, which will consequently raise prices in Eastern European countries where packs can be sold for less than three euros.

New changes to the EU directive on tobacco taxation from 2011 will also align the taxation of new products, such as vapes and heated tobacco, with cigarettes, as policymakers around the world are increasingly scrutinizing the popularity of new products among youth.

Somewhat stronger vape products would have an excise tax of at least 40 percent, while weaker ones would face a tax of 20 percent. Heated tobacco products could also be affected by nearly 55 percent higher customs costs, or a tax rate of €91 for every thousand sold items.

If the proposal is adopted, excise taxes on cigarettes would also significantly increase in countries such as Austria and Luxembourg where prices are relatively low compared to income, and it is expected that the increase in cigarette taxes ‘will pad the pockets’ of the European Union by an additional €9.3 billion.

Generation Without Tobacco

This proposal is a result of the European Union’s efforts to create a ‘generation without tobacco’ by 2040. Furthermore, as part of the EU’s plan to win the fight against cancer, health professionals aim to reduce tobacco use among Union citizens from the current 25 to 20 percent by 2025, with the ultimate goal of reaching five percent by 2040.

The Commission this month introduced a ban on flavored heated tobacco products to reduce the rising demand among younger consumers, while in the U.S., regulators from the Food and Drug Administration banned popular vaping products, such as Juul.

Experts believe this could save numerous lives, and price increases caused by taxes are considered one of the most effective tools for reducing tobacco use, with significant increases in minimum tax rates being crucial for achieving the desired reduction in cancer and other diseases.

However, the Secretary General of ESTA, the European Tobacco Association, Peter van der Mark, warned that this proposal could intensify illegal tobacco trade.

It is also believed that increasing the minimum excise tax would have a strong impact on consumers and economic entities in Union states where cigarette prices are currently relatively low, such as Bulgaria, Slovakia, Poland, and Hungary. All EU member states will need to agree on the proposal before it is adopted, and British American Tobacco (BAT), one of the world’s largest cigarette manufacturers, noted that this is ‘the beginning of a long legislative process.’