The European Commission has today proposed an update of the EU’s Tobacco Taxation Directive. In light of evolving public health challenges and significant shifts in the market, the reform modernises the Directive in line with the EU’s health and economic priorities and strengthens the Single Market.
Tobacco taxation is harmonised at EU-level but the latest update to the Directive is from 2010. Since then, market dynamics have changed significantly.
The revised Directive shall apply from 2028. A four-year transitional period will be implemented to ease the introduction of the new excise duty rates for certain products, allowing Member States to adapt to the changes.
A strong signal for public health
Increasing minimum EU tax rates is urgently needed to align with Europe’s Beating Cancer Plan’s 2040 goal of a tobacco-free Europe, where less than 5% of the population uses tobacco. The smoking prevalence of Europeans is not declining sufficiently fast to meet this objective. Smoking prevalence in the EU is still at 24%.
The proposal announced today is an important step to change this. In the EU alone, Tobacco is responsible for nearly 700,000 deaths every year. Around 50% of smokers die prematurely. Moreover, the new nicotine products are attracting young users. Taxation contributes to a 40% decline in smoking rates over the last decade, but outdated minimum rates are currently undermining further progress.
An updated taxation framework for an integrated Single Market
The current framework, last updated in 2010, has created a fragmented landscape across EU countries. A unified EU approach is necessary to eliminate regulatory loopholes, ensure a level playing field, and promote a more integrated and competitive market. By incorporating emerging products, the revised directive will address the existing regulatory gap and support the EU's public health goals, building on the efforts of Member States that have already started taxing these products.
The average rate applied at national level aross the EU Member States is now already more than twice the current minimum imposed by the EU. Hence the current EU minimum rate is outdated and does not serve any purpose. Furthermore, various new products, such as heated cigarettes and vapes, have entered into the market. These new products currently make up a 13% market value of the tobacco products sold in the EU. Those products are already taxed by a majority of - but not all - Member States but they are taxed in different ways and at different rates.
Harmonising tax rules across the EU and introducing minimum rates for such new products will allow for better controls, while giving flexibility to Member States to adapt their taxation rules in line with market developments in their country. The increased tax will also help to reduce their attractiveness as tobacco substitutes.
Generating revenue and further savings
Currently the control of the tobacco supply chain is ineffective. Overall, illicit tobacco manufacturing and trade is responsible for the EU losing EUR 13 billion in tax revenues every year. The updated minimum tax rates are estimated to generate additional EU-wide tax revenue of EUR 15 billion per year. Furthermore, an estimated EUR 6 billion will be saved in health-care costs, and further savings will be made through the reduction of tax fraud caused by illicit tobacco manufacturing in the EU.
The main novelties of the revised Tobacco Taxation Directive are:
- Increasing the minimum tax rates to reduce disparity in rates applied by Member States. The Commission proposes a partial purchasing power approach to manage price increases in Member States with lower average income. In practice, the EU minimum rate would be adjusted according to the economic situation in each individual Member State, based on general price levels. In so doing, citizens can be confident that their country’s tax rules are more effective in achieving public health objectives.
- Extending the scope of the directive to new products (e.g. e-cigarettes, heated tobacco and nicotine pouches). These products will be covered with new minimum taxes. Swedish snus remains outside the scope of the Directive, as stated in Sweden’s EU Accession Treaty.
- Better controlling measures concerning raw tobacco, which is subject to substantial fraud. Currently, tobacco leaves can be produced and circulated without control in the EU, which has led to the clandestine manufacturing of counterfeit cigarettes. With today’s proposal, the existing electronic system for recording and monitoring the movement of excise goods within the EU, will also apply to raw tobacco. This will help Member States better detect and fight the illicit trade in tobacco products.
Background
The European Commission proposal for a revision builds on Europe’s Beating Cancer Plan’s emphasis on taxation as a key tool for reducing tobacco use. The reforms aim to secure swift adoption by Member States, ensuring a unified approach to protecting public health while safeguarding the Single Market’s integrity.
The proposal to revise the Tobacco Taxation Directive is supported by an impact assessment, conducted in accordance with the Better Regulation principles. The assessment analyses in detail the possible impacts of different policy options.
Next steps
Today's package of proposals takes the form of amendments to two pieces of EU legislation: the Tobacco Taxation Directive (2011/64/EU) and the Council Directive on general arrangements for excise duty (2020/262/EU).
The legislative proposals will be sent to the Council for agreement and to the European Parliament and the Economic and Social Committee for consultation.
For further information
Details
- Publication date
- 16 July 2025 (Last updated on: 17 July 2025)
- Author
- Directorate-General for Taxation and Customs Union