Cyprus advances a compromise to break the EU’s tobacco tax deadlock. Photo credit: Daniel Kružík, Pexels.
A new compromise put forward by Cyprus could help resolve a long-running deadlock among European Union member states over tobacco taxation, offering a more measured approach after months of stalled negotiations.
The dispute centers on revisions to the Tobacco Excise Directive, last updated more than a decade ago. In 2025, the European Commission proposed sweeping changes, including higher minimum taxes on cigarettes and new EU-wide levies on products such as heated tobacco and nicotine pouches.
Those proposals quickly divided member states. Countries including Portugal, Italy, Greece, and Romania warned that sharp increases could disrupt legal markets, encourage illicit trade, and reduce government revenues, while others backed stronger tax alignment to support public health goals.
Earlier compromise efforts failed to bridge the gap. A revised draft circulated under Denmark largely preserved the Commission’s approach and even expanded some measures, including doubling suggested tax rates on heated tobacco and expanding the definition of raw tobacco in a way that could have brought nearly all harvested leaf under the tax system.
Critics said the measures would have driven sharp and immediate price increases for consumers across several markets. The proposal failed to win broad support, leaving talks at an impasse..
Cyprus, which currently holds the rotating EU Council presidency, has taken a different path. Its proposal keeps the overall structure of the Commission’s plan, including higher minimum taxes and the inclusion of newer products, but softens key elements to make agreement more attainable. The draft introduces a phased implementation period, limits automatic inflation-linked tax increases, and allows greater national flexibility—especially for newer nicotine products.
The approach aims to balance competing priorities across the bloc. While it still raises tobacco taxes and expands the directive’s scope, it avoids the sharp, immediate increases that previously triggered resistance. Early reactions from member states suggest cautious optimism that the plan could attract broader support.
Unanimity remains the central challenge. EU tax policy requires approval from all 27 member states, giving each government veto power and making compromise difficult.
Timing also adds pressure. Cyprus has until the end of its presidency this summer to secure progress. If negotiations spill over to the next presidency, where support for steeper tax hikes appears stronger, the debate could shift again and prolong the stalemate.