European Commission May Propose First EU Minimum Vape Tax Soon

A leaked report suggests the European Commission will soon propose steep European Union-wide minimum taxes on vapes, heated tobacco products and nicotine pouches. If adopted, the proposals outlined in the report would become part of the EU’s harmonized tobacco tax framework, called the Tobacco Excise Directive (TED).

Last December, Reuters reported that finance ministers from 16 EU states had asked the European Commission to propose updates to the 2011 TED, including a first-ever minimum tax on vaping products. In May, a letter from 15 ministers chided Commission president Ursula von der Leyen for delaying the TED update, according to the Financial Times.

The new leaked document is a Commission study of the likely financial and health impacts of raising minimum EU taxes on tobacco and imposing first-time minimum taxes on vapes, heated tobacco products (HTPs) and nicotine pouches.

What are the proposed minimum tax rates?

EU member states are not currently required to tax vapes, but many do. The European Commission proposals, if adopted, would set a base tax rate that all member states must impose—although each state would be free to set a higher tax rate.

According to the leaked impact assessment, the Commission is considering two vape tax schemes: 

1. Taxing all e-liquid at €0.36 per milliliter (or €3.60 per 10 mL bottle) 
2. Taxing liquids with a nicotine strength of 15 mg/mL or higher at the €0.36/mL rate, and imposing a lower rate of €0.12/mL for under-15mg/mL vape products

The proposals are similar to those in another report leaked in 2022.

The proposed vape taxes would double the cost of some e-liquids, especially in lower-income EU countries where cigarettes are also less costly. The effect would be to make cigarettes relatively more affordable. Likewise, the proposal that imposes a higher tax on 15-20 mg/mL e-liquids would disproportionately punish vapers who prefer higher nicotine levels, like those who have recently switched to vaping from cigarettes.

The minimum tax on nicotine pouches would be about €2.00 per can. HTP refills would be taxed at about €2.16 per 20-pack, which is close to half the proposed new minimum tax rate on cigarettes.

“Protecting kids” really means protecting cigarettes

The authors of the analysis freely admit that the proposed tax rates would wipe out 17-40 percent of the legal EU vaping products market, which is the second-largest vape market in the world. The unspoken assumption is that many vape consumers would return to cigarettes—a financial boon for tax authorities.

Since the Commission can’t say that out loud, the report falls back on the oldest and silliest anti-vape arguments to justify taxing cigarette alternatives: lack of long-term vaping health data and the discredited gateway argument. 

“The debate on the health risks of these products continues to advance and it is currently not possible to provide a detailed picture.” says the report. “However, there is strong evidence that e-cigarettes play a role in the initiation of smoking, especially for young people.”

The increased tax rate on cigarettes will reduce smoking, says the Commission. But adding taxes onto the cost of low-risk alternatives will partly offset the decrease (and kill more people).

The Council of the EU must approve the tax rules unanimously

The good news is that proposals in the report have a long way to go, and may not ultimately be adopted. The TED is a “Council directive,” and must receive unanimous support from ministers in the Council of the EU before it can be adopted. 

While the tax legislation is created by the European Commission, it must be approved by the entire Council, which is made up of one minister from each member state. 

Opposition from any country could derail adoption of the proposed tax scheme. Sweden, which produces most of the nicotine pouches sold in Europe, seems a likely candidate to object, although it’s impossible to predict what policy might result from negotiations within the Council. 

Proposals to impose an EU-wide vaping products tax have been suggested before—notably in 2020—but consumers have so far escaped the taxman. Will their luck run out this time?