Tobacco: Hoekstra unveils a controversial proposal to increase taxes on new products

Brussels – New taxes on alternative products to traditional tobacco? Tuesday of last week, during a lunch with the coordinators and members of the European Parliament’s Subcommittee on Taxation Issues (FISC, of which Pasquale Tridico, M5S, is chairman) in Strasbourg, Climate and Taxation Commissioner Wopke Hoekstra revealed that he will present the revision of the Tobacco Excise Directive in the coming months, speeding up on an issue on which the Commission apparently would instead like to stall, so much so that it has not included it in its work program for 2025. Instead, the Dutch government has recently pushed the European Executive to take action as soon as possible, and Hoekstra appears to be responsive to his national government’s demands.

According to sources close to the matter, the Commissioner’s goal is to increase the minimum rates and extend the scope of the current proposal beyond traditional cigarettes to new alternative tobacco and nicotine products.

To date, 13 countries have signed a letter in support of the adoption of the new Tobacco Excise Tax Directive — TED — (Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, Ireland, Spain, Slovakia, Netherlands, and Latvia), mainly those that will not be economically affected or will be affected minimally. Four member states are officially opposed (Italy, Greece, Romania, and Luxembourg have expressed opposition). Ten have not signed (including Germany and France).

Earlier this week, Italy’s Economy Minister Giancarlo Giorgetti met with Commissioner Hoekstra in Brussels, and, from a brief note from his Ministry, it appears that they also addressed the issue of tobacco taxation.  Italy is Europe’s largest tobacco producer, although 97 percent of the raw product grows in only four regions: Campania, Umbria, Veneto, and Tuscany. In early April, Italy reportedly wrote a letter to the Commission expressing its opposition to an increase in tobacco taxation, according to sources in Brussels.

However, divisions also exist within the European Commission.
According to observers following the dossier, the Dutch commissioner’s new TED proposal will disproportionately impact less wealthy countries, which would have to raise taxes significantly, negatively impacting consumers and inflation. The highest price increases will occur in Poland, the Baltic states, Romania, Greece, Bulgaria, the Czech Republic, and Slovakia. At the same time, the Netherlands, France, and Belgium will not be affected because they will already meet the new minimum tax, and thus, they will not need to raise taxes in this area.

European Commission President Ursula von der Leyen is not in a hurry. She is reportedly skeptical about the proposal, as she fears an increase in inflation in the context of economic difficulties and significant trade problems with the United States.