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Euractiv
5 days ago
- Business
- Euractiv
Tobacco tax in EU budget: What if Europe goes smoke-free?
The Commission wants tobacco taxes to fund a fifth of EU-level sources of income, but the proposal casts doubts on the bloc's goal of a smoke-free generation by 2040. The majority of the proposed €2 trillion budget still comes from national contributions, but a growing share is expected to come from new EU-wide revenue streams, known as 'own resources'. One of the biggest proposed sources: tobacco. Tobacco taxation will provide €11.2 billion annually – close to 20% of the EU's projected €58.3 billion in annual own resources each year. To put this into perspective, the first figure represents the annual amount collected by Italy alone in 2023. Over the seven-year cycle, that adds up to €78.4 billion, enough to fund a substantial portion of the bloc's planned defence spending. How it works Under the Commission's proposal, the EU would collect a flat 15% of each EU country's tobacco tax revenue and channel it directly into the bloc's budget. Tobacco tax rates vary widely across the EU. France currently has the highest tobacco taxes, while Bulgaria maintains the lowest, meaning the amount each country contributes under the plan would differ significantly. The levy would be collected regardless of how high or low national tobacco tax rates are. Importantly, the 15% levy, called the Tobacco Excise Duty Own Resource, or TEDOR, is not linked to the ongoing revision of the Tobacco Taxation Directive (TED), which the Commission proposed on Thursday and will soon be negotiated separately. The TED is a proposal to significantly raise tobacco tax rates across the EU. It suggests a 139% increase on cigarettes, a 258% hike on rolling tobacco, and – for the first time – high taxes on new products such as e-cigarettes, heated tobacco, and nicotine pouches. Previously, Commission sources in Brussels had floated using additional revenues of the revised TED to boost the EU budget. But that plan has now been dropped, with the proposal introducing TEDOR as a standalone tobacco-based own resource. Still, if the revised TED is adopted, it would indirectly boost even more the EU's income. So while the 15% rate stays the same, the EU budget grows along with national tax revenues. Practically, under the current TED or its revised version, member states will still be required to contribute 15% of their total tobacco tax revenues. This applies even to countries like France, which already imposes tobacco taxes above the current EU average, meaning new tax hikes as part of the TED revision would not affect its current levels. Dirty past One major challenge in collecting the 15% tax will be addressing the growth of black markets. Brussels, echoing the World Health Organisation, rejects claims that higher taxes lead to more illicit trade. Instead, EU officials argue that it is the lack of tax convergence across the bloc that fuels the illicit tobacco trade. Still, in a nod to this risk, the Commission has proposed a lower tax rate for water-pipe tobacco (shisha), where black market activity has grown in many EU countries, particularly Germany. Europol's 2025 organised crime threat assessment, however, states that countries with high excise and VAT rates are more vulnerable to the illicit sale of excise goods. What if everyone quits smoking? The claim that higher tobacco taxation would lead to a surge in the black market is one often cited by the tobacco industry. But the credibility of the argument is limited. Anti-tobacco groups see this argument as an attempt to undermine public health efforts. And it goes back to the industry's track record. In the 1980s, tobacco companies marketed filtered and 'light' cigarettes as 'harm-reduced' – a claim now widely debunked. Health organisations say the same mistake is being repeated today, with the industry promoting e-cigarettes and other alternatives as 'less harmful'. The Association of European Cancer Leagues welcomed the Commission's proposed tax hike, describing it as a step toward creating a tobacco-free generation. Still, it raises a practical question: what happens if higher taxes succeed and people stop smoking altogether? Would that blow a hole in the EU's budget? The Commission says no. It argues that the projected €11.2 billion in annual revenues already account for a decline in tobacco consumption over time. Moreover, the EU estimates that EU countries would save an additional €6 billion annually in tobacco-related healthcare costs. (mm)
Euronews
5 days ago
- Business
- Euronews
Brussels targets tobacco products with a new set of eurotaxes
On Wednesday, the European Commission unveiled two major proposals: a long-awaited revision of the Tobacco Taxation Directive and a brand new measure known as the Tobacco Excise Duty Own Resource (TEDOR). The revision of the Tobacco Taxation Directive aims to raise minimum excise duty rates—taxes levied on specific goods, such as tobacco, typically at the point of production or import. Under the new rules, the scope of the directive would also be broadened to include e-cigarette liquids, chewing and nasal tobacco, nicotine pouches, other nicotine products, and raw tobacco. The TEDOR proposal, presented separately as part of the EU's new €2 trillion long-term budget framework, would introduce a fresh stream of EU revenue independent of contributions from member states. Under TEDOR, a uniform 15% call rate would apply to the quantities of manufactured tobacco and related products released for consumption, based on the minimum excise rate applicable in each country. The Commission expects TEDOR to generate approximately €11.2 billion annually. However, it remains unclear whether the revenue will be used to repay borrowing under the NextGenerationEU fund or to reduce national contributions to the EU budget for new priorities. 'Own resources have no specific dedication. They always enter the yearly budget without being earmarked,' an EU official said. The official added that the revised tobacco taxation directive is "complementary but independent" from the TEDOR proposal. First major tobacco legislative tweaks in years These two proposals mark the first significant EU tobacco taxation legislation in years. A broader update of EU tobacco rules—once anticipated during Commission President Ursula von der Leyen's previous term—has been delayed and is currently on hold. The "Europe's Beating Cancer Plan", a flagship health initiative of the von der Leyen Commission, underscored the importance of taxation in reducing tobacco use, particularly among young people. However, repeated delays have raised questions about the influence of the tobacco industry on policymaking. The revised Tobacco Excise Directive will adjust minimum excise duties for traditional tobacco products, which currently date back to 2010. Under EU law, member states must impose a minimum rate on cigarette excise duties, though they are allowed to exceed that rate based on national priorities. With the new revised rules, the Commission wants to set excise duty on cigarettes at no less than 7.5% and no more than 76.5% of the total tax burden. The revision also aims to tighten controls on raw tobacco, which is often diverted into illicit markets. Cross-border shopping—when tobacco is bought in one country but consumed in another—would now be better tracked and accounted for. The EU plans to expand the current electronic system used to monitor excise goods movement to also include raw tobacco under its monitoring. Next steps: challenging path ahead Both the revised Tobacco Taxation Directive and TEDOR face significant political hurdles. In the EU, tax legislation can only be adopted by unanimous agreement in the Council of the European Union, where all member states are represented. The European Parliament is consulted but does not have legislative power in this area. Countries such as Italy and Greece have already voiced opposition to any tax-driven price increases on tobacco products. However, momentum may be building: in March 2025, health ministers from 12 member states sent a letter to EU health Commissioner Olivér Várhelyi urging more decisive action on tobacco and novel nicotine products. Despite growing support, reaching unanimity remains a major challenge, especially for revenue-generating measures like TEDOR, which also require approval by all member states in line with their national constitutional procedures.
Euractiv
12-07-2025
- Business
- Euractiv
EU to tax tobacco, large companies to fund next budget
Whilst EU countries want an ambitious budget, they will also have to repay the bloc's €650 billion covid loans from 2028. The budget proposals must be approved unanimously. Euractiv is part of the Trust Project Eddy Wax and Jacob Wulff Wold Euractiv Jul 12, 2025 15:19 2 min. read News Based on facts, either observed and verified directly by the reporter, or reported and verified from knowledgeable sources. The European Commission is hoping all EU countries can agree on new taxes on tobacco, large companies, electronics waste and carbon emissions to fund the EU budget, according to a draft proposal seen by Euractiv. The bloc's members are straining their finances, but the Commission wants an ambitious 2028 to 2034 budget (MFF) to boost competitiveness and defence. Direct contributions based on GNI, which financed 56% of the previous budget, "will reach its limits as financing needs increase," writes the Commission in its draft, before presenting its proposal for five new EU-level income sources. A Tobacco Excise Duty Own Resource (TEDOR) would "generate significant revenue" and also help towards the EU's health policy objectives. The document does not detail the excise duties, but Euractiv previously reported that the Commission has considered a 139% tax hike on cigarettes. A Corporate Resource for Europe (CORE) would tax companies with a permanent establishment in the EU and over €50 million in annual net turnover. To aid its green ambitions, the Commission proposes new contributions based on electronics waste. Two carbon levies which have already been floated – ETS1 and CBAM – will tax emissions inside and outside the EU. These proposals will stir debate among EU countries, which must approve them unanimously. To sweeten the deal, most ETS revenues would go to national budgets, and a temporary "solidarity adjustment mechanism" would balance differences between winners and losers of the new system. Proposals from 2020 and 2023 have not progressed much in the council, but the next budget is a unique opportunity. It is very difficult to agree on new revenue sources without also discussing expenditure, one EU diplomat told Euractiv this week. Whilst EU countries want an ambitious budget, they will also have to repay the bloc's €650 billion covid loans – known as the Recovery and Resilience Facility – from 2028. The EU will dedicate roughly one-fifth of its current annual budget size to these repayments (equal to €25-30 billion each year). (ow) Euractiv is part of the Trust Project
