EU hits an impasse on tobacco taxation. Again

Brussels – The European directive on tobacco taxation took two steps in opposite directions yesterday (3 June): it was approved in a scaled-back form by the Committee on Economic Affairs of the European Parliament, but was withdrawn from the Ecofin Council’s agenda on the same day due to a lack of unanimity. Consequently, the economic ministers will not discuss the issue on 12 June, the day of the ministerial meeting, and the dossier will be handled by the Irish Presidency. The EU is therefore stalling once again on tobacco taxation, confirming differing ideas and approaches. At the national level, differing views on the way forward persist and are reflected at the EU level. 

The European Parliament’s Committee on Economic and Monetary Affairs voted on its position regarding the tobacco taxation directive (TED) and adopted its recommendations with 32 votes in favour, 21 against, and 2 abstentions. The text softens the European Commission’s original proposal on almost all fronts. 

On cigarettes, Brussels had called for raising the minimum excise duties to 63 per cent of the retail price. MEPs, however, recommend keeping them at the current 60 per cent. The minimum threshold in euros drops from the Commission’s proposal of €215 to €200 per 1,000 cigarettes, compared with the current €94. The changes are expected to come into force on 1 January 2028. For other products – e-cigarettes, heated tobacco, nicotine pouches and cigars – MEPs recommend lower rates and longer transition periods, which in some cases extend as far out as 2034. MEPs also recommend delaying the automatic indexation of excise duties to inflation from 2028 to 2036, limiting automatic adjustments to a maximum of 9 per cent. The vote in plenary is expected on 17 June. 

The rapporteur for both texts, Tomáš Kubín (Patriots for Europe), defended the outcome: “My aim has been to support a modern and more coherent framework, while ensuring that the rules remain realistic, proportionate and enforceable. This is not about weakening the Commission’s objectives. It is about making the directive enforceable in practice.” 

According to Forza Italia MEP Marco Falcone (European People’s Party), “the majority that has consolidated within the Commission has chosen an approach that takes into account the economic and social effects of the reform. This is why we have reinforced the principle of ‘less risk, lower taxes’, reducing taxation on innovative products compared to traditional cigarettes, thereby adopting a common-sense fiscal approach.” According to the MEP, the reform combines “health, legality, competitiveness, and job protection.” 

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Of a different opinion is Cesar Luena, negotiator for the S&D Group (Socialists and Democrats), who considers the result “deeply damaging… for public health, for taxpayers, and for every European whose life could be saved by bolder action on tobacco.” He added that the reform of tobacco taxation is “long overdue, as the current legislation dates to 2010. This is a once-in-a-generation opportunity to make tobacco less affordable, protect people from nicotine addiction – especially youngsters – and secure greater public revenue. The Commission’s proposals were ambitious, but the EPP-far-right alliance stripped the reform of its purpose.”

Kubín concluded his remarks following the vote in the Committee on Economic and Monetary Affairs, expressing hope that “the Parliament’s progress will inspire the Council’s work” and that an agreement will be reached soon. Also yesterday, however, at a COREPER (Committee of Permanent Representatives of all Member States) meeting, the Cypriot Presidency announced that the dossier had been withdrawn from the Ecofin agenda due to a lack of unanimity among Member States.

The Presidency reported that it had made “every possible effort” during bilateral consultations and working group meetings to find compromise solutions acceptable to all delegations. While Member States generally considered the text to be “balanced” and appreciated the Presidency’s efforts, not all delegations are currently in a position to lift their reservations. “Unfortunately, despite our efforts over the last few months, it has not been possible at this stage to reach a consensus on this important dossier,” said a spokesperson for the Cypriot presidency. The directive, in fact, requires unanimity in the Council, and a single country is enough to block it. The result is somewhat surprising, given that Member States have expressed scepticism about the Commission’s proposal.