Smokers in the European Union pay much more in excise taxes than they pay on the cigarettes themselves. EU tobacco taxes are mandatory payments or charges collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. The Directive requires all member states to impose a minimum excise tax ( ) on cigarettes and other tobacco products. Excise taxes are typically levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, recreational activities, and gambling, and account for a relatively small and variable portion of state and local, and to a lesser extent federal, tax revenues. EU countries impose specific tobacco taxes (a fixed amount per pack of cigarettes) and ad valorem excise taxes (an additional percentage of the retail selling price).
The current minimum tobacco excise tax rate in the EU is €1.80 ($1.95) per pack of 20 cigarettes, with a minimum total excise tax of at least 60% of the national weighted average retail price, which has remained unchanged since 2014. Member states that impose a higher specific rate of at least €2.30 per pack do not have to meet the 60% requirement. The two excise taxes are levied before the addition of a widely applied value-added tax (VAT).
The EU Directive only provides for a minimum tax rate, but all countries impose higher rates.
In 2024, the average EU member state levied tobacco excise duties of over 80% of the retail sale price, meaning that taxes increased average prices for consumers by more than 450%.
The map shows that tobacco excise taxes vary widely across EU member states. Ireland has the highest tax in the EU at €9.92 ($10.72) per pack of 20 cigarettes, followed by the Netherlands at €7.66 ($8.28) and France at €7.45 ($8.05).
The lowest excise tax is in Bulgaria, at 1.92 euros ($2.08) per pack of 20 cigarettes, followed by Poland and Croatia, at 2.33 euros ($2.52) and 2.52 euros ($2.72), respectively.
The excise tax is levied in addition to the VAT applicable on cigarettes. Taking into account the total tax amount, the average tax rates on weighted average retail prices in EU countries range from 67.5% in Germany to 110% in the Netherlands in 2023. The data are calculated and published by the European Commission under Article 8 (paragraph 2) of the Tobacco Tax Directive using the weighted average price (WAP) of the previous year. In all countries with data using average retail prices for the same year, the tax rate on WAP is less than 100%.
Tobacco taxes are regressive, both because excise taxes are generally regressive and because smoking is prevalent among low-income groups. With a narrow tax base and declining consumption, tobacco excise taxes are a precarious source of revenue that is often redirected toward expenditures completely unrelated to smoking. High tobacco taxes tend to encourage cigarette smuggling and drive consumers to the illicit market.
KPMG estimates that more than 35 billion counterfeit and smuggled cigarettes will be consumed in the EU in 2022, representing 8.2% of total tobacco consumption and resulting in lost tax revenues of 11.3 billion euros ($12.2 billion). The largest markets for illicit cigarettes as a percentage of total consumption are France (32%), Ireland (24%) and Greece (21%), with France accounting for almost half of the EU's illicit consumption.
A major update to the EU Tobacco Tax Directive was considered but has been put on hold indefinitely. As smoking persists and consumption of counterfeit and smuggled cigarettes continues to rise, the European Commission may reconsider updating EU tobacco tax policy.
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