The proposed revision of the European Union’s tax framework for tobacco products failed to win approval at the Eurogroup after Malta refused to accept it.
The Irish proposal would raise the EU’s minimum excise duty on cigarettes from the current €90 per 1,000 cigarettes to €140 from July 2028, then to €170 in 2030 and €200 in 2032. By 2032, this duty would also generally have to amount to at least 60% of the weighted average retail price, subject to some exceptions.
These figures refer to minimum tax levels, not prices consumers would automatically have to pay. Any impact on retail prices would depend on existing national taxes, future government decisions and the extent to which tobacco companies pass the additional costs on to consumers.
The reform goes well beyond conventional cigarettes. Brussels aims to bring e-cigarettes, heated tobacco products and nicotine pouches under a common European tax framework, addressing differences between national tax regimes that have widened as the market for alternative nicotine products has grown.
Under the compromise, e-cigarette liquids, including those that contain no nicotine, would initially be subject to a minimum tax of 20% of the retail price or €0.20 per millilitre, with further increases to follow.
For nicotine pouches, the proposal sets common EU minimum rates of 10% of the retail price or €30 per kilogram from 2028. According to the Council’s negotiating document, these rates would rise to 25% or €40 per kilogram in 2030, and then to 50% or €50 per kilogram in 2032.
Disagreements among member states
These products were one of the main points of contention. Finland considered the proposed minimum tax on nicotine pouches too low, while Estonia opposed provisions that could allow future tax changes without the unanimous consent of member states.
Both countries were eventually persuaded to agree after the Irish presidency proposed additional provisions to review the taxation of nicotine pouches and amended the mechanism for adjusting minimum rates in line with inflation.
Malta remained the only country to continue opposing the agreement. The country’s finance minister, Clyde Caruana, said the proposed minimum rates were still too high compared with those currently in force in Malta and could disproportionately harm its economy.
He also expressed reservations about how far European legislation should determine national tax policy, arguing that governments should have sufficient leeway to respond to their own economic circumstances. Malta has said it supports the legislation’s broader aims but cannot accept the current terms.
As EU tax legislation requires unanimity, a single member state can block an agreement even when all the others support it.
The Irish presidency will continue its efforts
Ireland’s finance minister, Simon Harris, who chaired Monday’s meeting, acknowledged that the outcome of the negotiations was disappointing but welcomed the support secured from 26 countries. He described nicotine and tobacco use as a “public health emergency” and said the Irish presidency would continue efforts to reach an agreement in December.