Tobacco, towards EU tightening on foreign purchases and new excise duties but more time in Italy

Dublin is trying to unblock the reform at today's Ecofin meeting, Monday 9 November. The meeting in the afternoon will be chaired by Irish Finance Minister Simon Harris. The EU presidency is aiming for a political agreement to increase European minimum excise duties and extend them to new products, including e-cigarettes and nicotine sachets.

The main political obstacle remains the taxation of tobacco-free nicotine pouches, which are widespread in Sweden. Dublin is proposing an initial minimum tax of 10% of the price or 30 euros per kilo, to be gradually increased to 50% or 50 euros per kilo from 2032. But the final level will have to be agreed directly by ministers. Spain's requests for shredded tobacco also remain on the table.

The objective is to update a 2011 directive, now outdated by the evolution of the market, increasing the minimum taxes on traditional products and extending harmonized taxation for the first time to more recent ones, from electronic cigarettes to nicotine sachets. The EU does not directly establish sales prices, but the minimum excise duties that states must apply, leaving them free to impose higher taxes.

For cigarettes, the mediation provides for a minimum threshold of 140 euros per thousand pieces from July 2028, destined to rise to 170 euros from 2030 and to 200 euros from 2032, when the requirement for an excise duty equal to at least 60% of the weighted average sales price will also come into full force, subject to the exceptions provided for. These are not automatic increases of the same amount on the price of the packages.

The presidency proposes an additional transitional period for Italy, Bulgaria, Greece, Spain, Croatia, Cyprus, Luxembourg, Portugal, Romania and Slovenia, which to reach the new levels would have to increase excise duties on cigarettes by more than 2.35% per year on average compared to 2025. For these countries, full compliance could be postponed to 1 January 2036. The flexibility would also be extended to shredded tobacco used for DIY cigarettes.

Another chapter concerns cross-border purchases. The proposal lowers the indicative quantity used to establish whether tobacco transported by a private individual between EU countries is intended for personal consumption from 800 to 200 cigarettes, from four to one carton. Exceeding the threshold would not automatically lead to a ban or penalty: States would have to evaluate the nature of the purchase and could adopt a fixed quantitative criterion, in any case not less than 300 cigarettes.

The mediation also introduces minimum excise duties on electronic cigarette liquids, even without nicotine, initially set at 20% of the sales price or 20 cents per milliliter, with gradual increases until 2032. The possibility of periodically updating the thresholds based on inflation is also envisaged, with unanimous decisions of the Twenty-Seven.

France expressed support for the mediation system, in particular the reduction of thresholds for cross-border purchases, the modulation of taxes based on purchasing power and their adjustment to inflation. Bercy sources expressed confidence in the possibility of reaching an agreement at Ecofin, while calling for caution while awaiting the examination of the latest version of the compromise. An agreement on the revision of European rules for tobacco taxation is close, but some issues still remain to be resolved, a senior EU diplomat also confirmed in recent days, adding that some elements of the proposal could have been more ambitious, but highlighting the need to find a consensus among all the Twenty-Seven.