The European Commission’s approval of the 2028–2034 Multiannual Financial Framework signals a seismic shift in how tobacco taxation will function across the European Union. While touted as a modernization of fiscal policy, the measures raise critical questions about the future of harm reduction and whether safer alternatives to smoking will remain accessible and incentivized.
🔍 What’s Changing?
Under the new framework, tobacco taxation becomes an “Own Resource” for the EU, expected to generate €11.2 billion—about 15% of total Member State tobacco excise revenue. This move is set to reshape how nicotine products are taxed, with the Tobacco Excise Duties Directive (TED) receiving a major overhaul.
Here are the proposed minimum excise rates under the revised directive:
- Nicotine pouches: 50% of the retail price or €143/kg
- E-cigarettes: 20–40% of the retail price, depending on nicotine strength
- Cigarettes: From €90 to €215 per 1000 cigarettes, plus 63% of the retail price
The increase in tax on nicotine pouches is particularly steep, up from a previously proposed 40%, despite their classification as smoke-free, tobacco-free alternatives.
🚨 A Harm Reduction Paradox
The Commission rightly notes that taxation has contributed to a 40% decline in smoking across the EU over the last decade. Yet this progress is now threatened by an emerging contradiction:
Safer alternatives like nicotine pouches and e-cigarettes are being taxed at levels that could deter switching, while cigarettes, the most harmful products, retain relative affordability.
This strategy seems at odds with the EU’s own “Tobacco-Free Generation by 2040” goal. If reduced-risk products are taxed similarly—or even more harshly—than cigarettes, the incentive to quit or switch is weakened.
💡 Market Realities and Missed Opportunities
The new tax framework does aim to address illicit production and trade, which reportedly costs Member States €13 billion annually. It also seeks to bring previously untaxed products into a formal regulatory space—important steps for market integrity.
But the unintended consequences are clear:
- Smokers may be discouraged from switching to less harmful alternatives
- Price distortions could make combustible products relatively more attractive
- Public health goals may be overshadowed by revenue priorities
In short, the EU risks using fiscal tools in a way that inadvertently reinforces smoking, rather than accelerating its decline.
⚖️ Striking the Right Balance
The upcoming changes will roll out gradually, by 2028, with some transition periods until 2032. This gives Member States time to evaluate the real-world impact of the directive.
At GINN, reduced-risk products must be taxed proportionately to their risk, not lumped into a one-size-fits-all fiscal model. Policies that treat all nicotine products as equal in harm undermine innovation, discourage switching, and ultimately compromise public health.
📣 Our Call to Policymakers
As discussions move forward, we urge EU leaders to:
- Differentiate taxation by risk profile
- Align fiscal measures with harm reduction goals
- Ensure access to affordable, regulated alternatives to smoking
- Avoid overtaxing products that help reduce smoking prevalence
🚀 What’s Next?
The EU has a choice: double down on evidence-based harm reduction, or let fiscal priorities drive a policy that may entrench the cigarette market.
GINN will continue to engage with policymakers, regulators, and the public to ensure taxation supports—not obstructs—the path to a smoke-free Europe.
