On 16 July 2025, the Commission adopted a proposal for a recast of the 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.
Main changes
This revision of the Tobacco Taxation Directive aims to update the current legal framework for excise duty on tobacco in line with the objectives of Europe’s Beating Cancer Plan, by better aligning the taxation of tobacco and related products with health objectives through three approaches:
- Increasing the minimum tax rates to reduce disparity in rates applied by Member States. In practice, the EU minimum rate would be adjusted according to the economic situation in each individual Member State, based on general price levels.
- 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.
- Better controlling measures concerning raw tobacco, which can be diverted to the illicit supply chain. With the proposal, the existing electronic system for recording and monitoring the movement of excise goods within the EU (EMCS) will also apply to raw tobacco. This will help Member States better detect and fight the illicit trade in tobacco products.
Why this proposal?
Tobacco taxation is harmonised at EU-level but the latest update to the Directive is from 2010. The framework needs to be updated on various aspects.
First, the average rate applied at national level in EU Member States is already well above the current minimum imposed by the EU. Hence, current EU minimum rates have lost traction in effectively reducing tobacco consumption. The smoking prevalence of Europeans is not declining sufficiently fast to meet the Europe’s Beating Cancer Plan objective, ensuring that less than 5% of the population uses tobacco by 2040. Smoking prevalence in the EU is currently still at 24 %.
Second, various new products, such as heated tobacco, e-cigarettes and nicotine pouches, have entered the market. Harmonising tax rules across the EU and introducing minimum rates for such 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.
Third, illicit trade in tobacco products remains substantial and continues to constitute a source of concern for Member States. A substantial amount of products subject to illicit trade are actually manufactured within the EU from raw tobacco. The inclusion of raw tobacco in the scope of the Directive will in part address this issue.
Next steps
The legislative proposals will be sent to the Council for agreement and to the European Parliament and the Economic and Social Committee for consultation.
Documents and legal texts
The revision 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).
Background
In its conclusions of 2 June 2020, the Council recommends taking a comprehensive approach to the review of EU rules, that in addition to responding to fiscal objectives, addresses public health, illicit trade and environmental concerns.
In February 2020, the European Commission published an evaluation of the functioning of the Directive on excise duties for manufactured tobacco.
The evaluation examined if the excise duty rates applied to manufactured tobacco have protected public health and ensured a proper functioning of the internal market. It also assesses the performance of the Tobacco Taxation Directive against the evaluation criteria set out in the Better Regulation Guidelines.
The evaluation shows that while the current rules work well in terms of predictability and stability for EU countries’ fiscal revenue, it is no longer as effective in deterring consumption. The increase in EU minimum rates for cigarettes and fine-cut tobacco, as set out in the Directive, only had an impact in a few EU countries, which had very low levels of taxation in the first place.
The high number of smokers in the EU is still a matter of significant concern with 26% of the overall EU adult population, and 29% of young Europeans aged 15-24, smoking. The launch of Europe's Beating Cancer Plan highlights the pivotal role of taxation in reducing tobacco consumption and in deterring young people from smoking.
In addition, price gaps between Member States – the average price of a pack of cigarettes can range from €2.57 to €11.37 – represent a sufficient economic incentive for high levels of cross-border shopping. The evaluation also highlights that the emergence of new products, such as e-cigarettes, heated tobacco products and new addictive products reveal the limits of the current legal framework.
The evaluation concludes that a more comprehensive approach, taking on board all aspects of tobacco control including public health, taxation, the fight against illicit trade and environmental concerns, is needed.
An external study was finalised in 2025 to provide a comprehensive and evidence-based impact analysis for the revision of the Council Directive on the structure and rates of excise applied to manufactured tobacco.
- Report from the Commission to the Council(January 2018)
- Council Conclusions from 8 March 2016, adopting the report and requesting the Commission to carry out the necessary studies to prepare a possible legislative proposal for revision of Directive 2011/64/EU
- Report from the Commission to the Council (December 2015)