The Briefing concludes that the reform aims to reduce tobacco use, curb cross-border distortions, and combat illicit trade through updated rates, harmonised rules for new nicotine products, and an automatic adjustment mechanism.
The European Parliament published a briefing titled “Revision of the Tobacco Taxation Directive“(the Briefing) on 8 September 2025, highlighting that higher EU-wide minimum excise duties and covering new tobacco and nicotine products are crucial to achieve a tobacco-free generation by 2040.
The Briefing also emphasises that taxation is the most effective means to curb tobacco consumption. It highlights the need to strengthen the Excise Directive on Tobacco (2011/64), whose impact has diminished since its adoption in 2011.
On 16 July 2025, the European Commission proposed a revision to the Tobacco Taxation Directive, alongside modifications to the general Excise Duty Directive. The aim is to restore the effectiveness of EU-wide minimum tax rates on tobacco products and extend their scope to cover new product types. The initiative aims to support the EU’s goal of a tobacco-free generation by 2040, recognising taxation as a key tool in reducing tobacco use.
Within the EU, the Tobacco Taxation Directive (Council Directive 2011/64/EU) sets out minimum tax rates on the sale of manufactured tobacco products in the EU. The directive carries an explicit dual goal of ‘ensuring the proper functioning of the internal market and, at the same time, a high level of health protection’ (recital 2).
However, since it entered into force in 2011, the directive has remained unchanged, maintaining the same minimum rates and not accounting for new products in the tobacco market, such as e-cigarettes. Given the role of pricing measures in curbing tobacco use, the Commission believes that the EU’s target of a tobacco-free generation cannot be achieved in time without changes to the Tobacco Taxation Directive.
Main points of the proposal
On 16 July 2025, the Commission tabled a proposal for the revision of the Tobacco Taxation Directive, alongside an impact assessment. The revised directive is proposed to apply from 2028.
Extending the scope of the directive to new products
The tobacco market has changed to a great extent since the adoption of the (current) Tobacco Taxation Directive in 2011.
In particular, the arrival and (increasing) popularity of new products have changed consumer patterns:
- liquids for e-cigarettes;
- heated tobacco products (tobacco or a near-substitute is heated rather than ‘burned’ and releases a vapour aerosol);
- other manufactured tobacco (for instance, chewing and nasal tobacco);
- nicotine pouches and other nicotine products).
These products are not covered by the current directive, leading to unaligned interpretations on their fiscal classification and treatment, as well as their coverage under the excise movement and control system (EMCS – an EU track-and-trace system for the movement of excise goods; see Background for further information) between Member States. For instance, nearly all Member States impose taxes on heated tobacco products, but Member States use different tax bases, such as weight or unit count, or apply differentiated rates depending on the format (sticks/non-sticks).
To take the new developments in the tobacco market into account, the Commission proposes to expand the scope of the current directive to new products (Article 2), adding harmonised definitions on heated tobacco (Article 7), other manufactured tobacco (Article 8), liquids for e-cigarettes (Article 9), nicotine pouches and other nicotine products (Article 10). A harmonised approach to these products is intended to ensure legal certainty for traders and provide a coherent approach to the Revision of the Tobacco Taxation Directive 3, the taxation of these products at the EU level in line with public health objectives, as well as the movements of these products under the EMCS.
To fight the illicit trade of tobacco, it is proposed to include raw tobacco within the scope of the directive (Articles 2 and 23). By bringing raw tobacco in scope, the proposal would allow greater oversight of raw tobacco movements across the EU through the EMCS, reducing the risk of diversion to illicit manufacturing operations.
Revising minimum tax rates
The Tobacco Taxation Directive’s key element is a system of EU-wide minimum levels of excise duty on manufactured tobacco divided between four product categories: cigarettes, cigars and cigarillos, fine-cut smoking tobacco to roll cigarettes, and other smoking tobacco. Member States are free to set their national excise duty rates as they see fit, as long as the minimum rates are respected. For instance, under the current directive, the excise duty charged on cigarettes must represent in each Member State at least 60 % of the weighted average retail selling price (WAP) and not be less than EUR 90 per 1,000 cigarettes.
The proposal introduces significantly higher minimum excise duties across tobacco and nicotine products. For cigarettes, the minimum tax will be EUR 215 per 1,000 units or 63% of the weighted average retail price, while fine-cut tobacco will face EUR 215 per kilogram or 62% of the weighted average retail price. Transitional increases are planned for cigars, cigarillos, waterpipe tobacco, heated tobacco, and other manufactured tobacco, gradually aligning their rates with those for cigarettes. Additionally, novel products will be taxed: e-liquids at EUR 0.12 or EUR 0.36 per millilitre depending on nicotine content, and nicotine pouches at up to 50% of the retail price by 2032.
Persistent cross-border shopping and illicit trade undermine public health goals and reduce tax revenues for EU Member States. The European Commission also warns that without a comprehensive revision of the Directive, the EU’s cancer-prevention targets cannot be met on schedule.
Additionally, the illicit trade in tobacco products – including the illegal manufacturing of cigarettes and other tobacco goods – continues to pose a serious challenge for EU Member States. These illegal products bypass excise duties, leading to a loss of tax revenue, with estimates suggesting that +/- EUR 10 billion in revenue is lost in the EU each year due to the illegal tobacco trade, and undermining the level-playing field for compliant tobacco product firms.
Industry groups, led by Tobacco Europe, oppose the proposed tobacco tax increases, citing risks of revenue loss and illicit trade. At the same time, public health advocates praise the reforms as a vital step toward an EU tobacco-free generation.
The update aims to raise minimum rates, harmonise rules for new nicotine products, and implement automatic adjustments to reduce tobacco use, cross-border distortions, and illicit trade.
