European Commission Wants High Taxes on Low-Risk Nicotine

The European Commission has released a proposed revision to the European Union’s tobacco tax plan, including—for the first time—EU-wide minimum taxes on vapes, nicotine pouches and heated tobacco products. The proposal would also increase taxes on cigarettes, cigars, and other tobacco products.

The proposed revision to the  Tobacco Excise Directive (TED—also called the Tobacco Taxation Directive) was announced July 16, along with a separate proposal to divert 15 percent of member states’ tobacco tax revenue directly to the EU to help fund a spending increase over the next seven-year budget cycle. 

Both proposals must receive unanimous support in the Council of the EU to pass. Each member state has one vote—and veto power—in the Council.

EU leaders are eager to tap into smoke-free nicotine revenue

The last TED revision was adopted in 2011. At that time, vaping had not yet established itself as a major threat to the cigarette market, and both nicotine pouches and heated tobacco products (HTPs) were years away from being marketed.

Although the 2011 TED contained no mandate forcing member states to tax vapes, some EU countries had already begun to impose vape taxes, and many more have since then. Currently, 21 of the 27 EU member states collect some kind of a vaping product tax, and many also tax HTPs, but few countries have begun to tax nicotine pouches.

As we reported in June, the decision to propose EU-wide minimum taxes on low-risk nicotine products was made after a majority of EU member states pressured European Commission president Ursula von der Leyen to take action. 

The proposal received enthusiastic support from EU health commissioner Oliver Varhelyi, who posted on X (formerly Twitter) that “we acknowledge that new tobacco and nicotine products pose health risks comparable to traditional ones.”

40% tax on vapes, 50% on nicotine pouches, 55% on HTP sticks

The Commission proposals, if adopted, would set a base tax rate that must be adopted by each EU member state for each kind of nicotine and tobacco product. Each member would be free to exceed the minimum tax, but none could maintain a tax rate below the minimum.

While the Commission’s tax plan suggests gradually increasing the minimum tax rate for nicotine pouches, these are the eventual minimum tax goals:

• E-liquid (bottled or contained in devices or refill pods) with a nicotine strength of 16-20 mg/mL: 40% of the retail price (or €0.36/mL)
• E-liquid with a nicotine strength of 0-15 mg/mL: 20% of the retail price (or €0.12/mL)
• Nicotine pouches: 50% of the retail price (or €143 per kilogram)
• Heated tobacco product refill sticks: 55% of the retail price (or €108 per 1,000 sticks)

Also proposed: using tobacco taxes to cover EU budget expansion

The Commission also announced a separate plan to use a portion of each country's tobacco and nicotine product taxes to fund the EU itself. Most of the bloc’s revenue comes from direct contributions by member states, but the Commission has proposed using additional revenue streams (called “own resources”) to cover part of its proposed budget for 2028-2034, which totals nearly €2 trillion.

The plan, called the Tobacco Excise Duty Own Resource (TEDOR), would divert 15 percent of each country’s tobacco tax revenue to the EU budget. According to Euractiv, the TEDOR plan would provide the EU with €11.2 billion a year—about 20 percent of the proposed EU “own resources” income. The TEDOR plan will be negotiated and voted on separately from the TED revision. 

The proposed tax revision and the TEDOR plan must receive unanimous support from all 27 ministers in the Council of the EU to be adopted. The European Parliament will consult on the plan, but cannot overrule the Council. Several countries have already expressed doubts about one or both proposals, including Greece, Italy and Sweden. 

Sweden entered the EU in 1995 only after receiving an exemption from the bloc’s ban on snus. Since then, Swedish smoking rates have declined to the lowest in the EU, while the EU as a whole maintains a 24 percent smoking rate. Sweden is also the largest producer of nicotine pouches in the EU.

It only takes one country to hang the proposed tax plan.