The EU’s highest-smoking nations reel as EU unleashes historic tobacco tax bombshell

The European Union is set to introduce its steepest-ever tobacco tax increase, a move that could raise cigarette prices by up to 50% across the eurobloc.

While aimed at improving public health, the proposal has sparked alarm in Greece and Cyprus, where high smoking rates and economic pressures could amplify the impact on consumers and fuel tobacco smuggling.

The European Commission presented on 10 October a proposal to revise the EU’s Tobacco taxation directive during Eurogroup and ECOFIN meetings in Luxembourg. The plan, developed with input from northern European countries like France and the Netherlands, would increase the minimum excise duty on cigarettes by 139%, from €90 to €215 per 1,000 cigarettes. This is equal to an increase of €4.5 to €10.75 per pack of 20.

If implemented, the retail price of a 20-cigarette pack in Cyprus, currently around €5, could rise to €7–€7.50. For daily smokers, this translates to an additional €700–€800 annually, roughly equivalent to a monthly pension. In Greece, where a pack costs about €4.60, prices could exceed €7 unless tobacco companies absorb part of the increase. Taxes currently account for 81% of the retail price in Greece, or €3.74 per pack.

The proposal also targets other tobacco products. The minimum excise duty on heated tobacco products would rise from €88 to €155 per 1,000 units, while e-liquids would see an increase from €0.10 to €0.36 per milliliter.

Public health goals vs. economic concerns

The European Commission argues that the tax hike will promote public health and modernize a 15-year-old framework while boosting EU revenue. However, southern European countries, where smoking rates are among the highest, fear significant economic and social repercussions.

According to the latest Eurobarometer survey, 25% of EU citizens smoke, with Bulgaria (37%), Greece (36%), Croatia (35%), and Romania (34%) topping the list. Cyprus ranks seventh with 29%, while Sweden (8%), the Netherlands (11%), and Denmark (14%) report the lowest rates. The survey also highlights a gender gap, with 28% of men and 21% of women smoking, and notes that young men aged 25–39 facing financial hardship are the most likely to smoke (32%).

In Greece and Cyprus, high smoking prevalence combines with relatively low disposable incomes, making the proposed tax hike a potential burden for consumers and small retailers already under financial strain.

Smuggling risks and regional objections

Authorities in Greece, Cyprus, and Bulgaria are particularly concerned about a potential surge in tobacco smuggling. In Cyprus, smuggling is already prevalent near the occupied north, where tobacco products are significantly cheaper. Bulgarian Finance Minister Temenuzhka Petkova warned that as an EU external border country, Bulgaria faces a high risk of increased illegal trade if excise duties rise sharply. She also expressed concerns about including raw tobacco in the EU’s excise goods monitoring system and indexing rates over time.

At the ECOFIN meeting, Greek Minister of National Economy Kyriakos Pierrakakis echoed these concerns, emphasizing that excessive tax hikes often lead to more smuggling. “Public health is a priority, but overly aggressive increases can harm competitiveness and investment,” he said, advocating for transitional periods to ease implementation.

Greg Kamberis, Managing Director of Philip Morris Cyprus and Malta, cautioned during a Cyprus Forum panel that sharp price increases could drive consumers to the black market, undermining both fiscal and public health goals. He urged policymakers to consider Cyprus’ unique circumstances and the impact on different tobacco categories.

While the EU aims to reduce smoking through higher taxes, critics argue that the steep increase could disproportionately affect lower-income smokers and exacerbate economic challenges in southern Europe. Countries like Ireland, France, and the Netherlands already impose higher tobacco taxes but continue to grapple with smuggling, suggesting that higher duties alone may not curb consumption effectively.

As the EU Council of Finance Ministers prepares to discuss the proposal further, with implementation targeted for 2028, member states like Greece and Cyprus are pushing for a balanced approach that addresses public health without destabilising local economies or fueling illicit trade.

The original article published with EUalive’s media partner Politis can be found here.

Caption: Two women smoke cigarettes on a street in Milan, Italy, 2 January 2025, following the city’s new smoking regulations that took effect on 01 January. Smokers must now be at least ten meters away from others when smoking outdoors or face fines ranging from 40 to 240 euros. EPA/MATTEO CORNER