As the European Commission pushes forward on its most ambitious tobacco tax reform in over a decade, Portugal has stepped up as a strong opponent to key elements of the proposal. The sweeping reform, designed to align with the EU’s Beating Cancer Plan and introduce minimum tax levels on novel nicotine products like vapes and pouches, has drawn praise from public health advocates. But it also faces mounting criticism from countries that warn of unintended consequences. At the forefront of this resistance is Portugal, which argues that the proposed tax increases could undercut public health goals, harm national budgets, and fuel illicit trade.
This blog explores the background of the tax overhaul, the specific economic and policy objections raised by Portugal, and the broader implications for tobacco harm reduction (THR) efforts across Europe.
What the Commission Is Proposing
On July 16, 2025, the European Commission unveiled a plan to revise the Tobacco Taxation Directive (TTD) and to create a new EU revenue stream through the Tobacco Excise Duty Own Resource (TEDOR). Key components include:
- Raising minimum excise taxes on cigarettes by 139% and on rolling tobacco by 258%
- Introducing EU-wide minimum taxes for vaping liquids (40% of retail), nicotine pouches (50% of retail), and heated tobacco (55% of retail)
- Diverting 15% of national tobacco excise revenue to the EU budget under TEDOR
- Harmonizing tobacco prices across member states to combat illicit trade
According to Commission estimates, these measures could generate an additional €15 billion in tax revenues and save €6 billion annually in healthcare costs.
Portugal’s Case Against the Overhaul
Portugal has responded with a firm and detailed critique, raising objections under three main themes: economic impact, harm reduction policy, and national fiscal sovereignty.
1. Equal Taxation of Unequal Products
Portugal argues that the proposed reform fails to account for the relative risk profiles of nicotine products. By applying similar or identical excise taxes to cigarettes, e-cigarettes, heated tobacco, and nicotine pouches, the proposal removes financial incentives for smokers to switch to less harmful alternatives. Lisbon insists that a health-based tax policy should reward harm reduction rather than punish it, and calls for a differentiated tax scheme that reflects product risk. Sweden and Romania have echoed these sentiments, pointing to their own national harm reduction successes as evidence that not all nicotine products should be taxed equally.
2. Risk of Illicit Trade and Revenue Loss
The proposed 24% overnight hike in cigarette prices in Portugal (€1.22 per pack) could push more consumers toward illegal tobacco products. Portugal warns that the black market will expand, eroding legitimate tax revenues and threatening public health with unregulated products. Similar outcomes were observed in countries like France and Hungary after previous sharp excise increases. Though the Commission maintains that price convergence will reduce smuggling incentives, critics argue that in the short term, the opposite effect may occur.
3. Loss of Fiscal Autonomy
Perhaps the most contentious issue for Portugal is TEDOR, the requirement to divert 15% of national tobacco tax revenue to the EU. For Portugal, this would mean an estimated loss of up to €1.5 billion over the 2028–2034 budget period. Lisbon calls the measure “unacceptable,” warning it sets a dangerous precedent for EU encroachment on national taxation authority.
The Vaping and Pouches Dilemma
One of the most divisive elements of the reform is how it treats vaping and oral nicotine products. These items have gained popularity as harm reduction tools, with countries like the UK and Sweden reporting significant declines in smoking rates due to their availability. Portugal contends that by taxing these products on par with cigarettes, the EU is undermining its own public health goals. Officials warn that some vapers might even revert to smoking if vape prices become unaffordable.
While some public health groups argue that high taxes are necessary to prevent youth uptake of novel nicotine products, others maintain that adult smokers should be given practical and affordable alternatives. The outcome of this debate will determine whether the revised TTD ultimately promotes or discourages innovation in harm reduction.
The Bigger Picture: Health Goals vs. Economic Reality
Portugal’s opposition underscores a deeper question: Can Europe meet its tobacco-free targets without triggering backlash in member states already grappling with economic stress, border smuggling, and fragile healthcare systems?
Unanimous agreement among EU countries is required for the tax directive and TEDOR to proceed. This gives Portugal and other skeptical countries substantial leverage in negotiations. Concessions may be needed, possibly in the form of phased implementation, tiered tax rates, or reduced TEDOR percentages, to secure broad support.
At GINN, we believe any reform must balance ambition with pragmatism. Tobacco harm reduction is a vital tool to reduce smoking-related disease and death. Regulation should distinguish between combustible and non-combustible products and support adult access to safer alternatives. The revised TTD should be a framework for smarter taxation, not a blunt instrument that stifles innovation and undermines public health goals.
As negotiations unfold, Portugal’s resistance may well help shape a more nuanced, effective policy—one that maintains Europe’s leadership in tobacco control while respecting economic diversity and national autonomy.
