Lawmakers clashed over the European Commission’s tobacco tax overhaul during a tense November 20 FISC meeting. Photo credit: Pixabay.
European lawmakers and experts sharply challenged the European Commission’s proposed overhaul of tobacco taxation during a tense November 20 meeting of the Parliament’s taxation committee (FISC). According to EU Reporter, Commission officials defended the reform as a necessary update, while members of the European Parliament (MEPs) and invited specialists warned it could destabilize the single market, weaken Europe’s competitiveness, and strengthen illicit trade networks.
The debate focused on the Commission’s plan to revise the Tobacco Excise Directive (TED), which sets minimum tax levels across the EU and would for the first time extend harmonized rules to novel nicotine products such as e-cigarettes, vapes, and nicotine pouches. Lawmakers pressed the Commission on how higher, uniform minimum rates might reshape the single market and influence cross-border price gaps.
Experts told MEPs that steep tax increases on both traditional and newer nicotine products could trigger significant economic and social consequences. They argued that the updated TED risks eroding the EU’s industrial competitiveness and ignoring broader impacts on consumers, farmers, and supply-chain workers.
The Commission, which unveiled the reform in July, framed the revision as part of its drive toward a “tobacco-free generation” by 2040. Critics countered that the proposal overlooks critical realities—consumer price sensitivity, the EU’s vulnerability to illicit trade, and the potential for job losses and agricultural disruption.
Europe already contends with entrenched tobacco smuggling, helped by extensive land borders and proximity to low-cost markets such as Belarus, Ukraine, and Moldova. EU Reporter highlighted recent incidents, including hundreds of weather balloons reportedly launched from Belarus into Lithuania to distract border forces overseeing a sophisticated smuggling network.
Professor Francesco Moscone of the University of Venice and Brunel University London told lawmakers that the TED proposal stretches far beyond fiscal policy. With Europe facing an aging population and strained health systems, he said revising any European directive creates a chance to align tax policy with fiscal stability, public health, and economic resilience. He warned that poorly calibrated tax policy could produce both financial and health setbacks and stressed that taxation design requires a balance between market behavior, national budgets, and risk-differentiated incentives.
Commission data showed a statistically significant link between sharp excise increases and illicit trade. High taxes risk creating a “lose-lose scenario” in which governments lose revenue, consumers turn to unregulated products, and criminal groups expand their market share. Moscone also warned of a potential 0.55% rise in EU-wide inflation tied to the excise adjustments—an increase that could weaken consumption and raise borrowing costs.
EPP MEP Marco Falcone argued that the proposal fails to differentiate adequately between combustible cigarettes and reduced-risk alternatives such as heated tobacco, vapes, and pouches based on health risk.
Dr. Hana Ross of the Vienna Institute for International Economic Studies and the University of Cape Town told the committee that the current TED has no mechanisms to adjust for inflation or rising incomes, leaving minimum tax levels outdated and widening price disparities across member states. She argued that these gaps encourage cross-border shopping and product substitution, undermining both revenue collection and public-health objectives. Roll-your-own tobacco, she said, also benefits from an “unjustified” tax advantage.
Some lawmakers questioned competence. Luxembourg MEP Fernand Kartheiser warned that the new TED could infringe on member states’ authority over taxation and health policy. He noted that the reform is forecast to generate €15 billion (US$15.9 billion) in new revenue, with €11.2 billion (US$11.9 billion) flowing to the Commission, calling the scale “excessive centralization.”
Public-health advocates took the opposite view. Gijs van Wijk of the Smoke Free Partnership argued that higher prices remain the most effective tool to reduce tobacco use, particularly for youth and low-income groups, and that harmonized excise rules would prevent manufacturers from exploiting price gaps.
Industry representatives countered that risk-reduced products merit lower tax treatment. Christa Pelsers of Tobacco Europe said scientific consensus increasingly recognizes that heated tobacco, vapes, and pouches pose lower risks than cigarettes when users switch completely. Because nicotine itself is not carcinogenic and combustion produces most toxicants, she said tax rates should reflect relative harm.
Italian MEP Gaetano Pedullà warned that the proposal could devastate agricultural and manufacturing sectors, particularly in countries such as Italy, which recently invested heavily in next-generation production. “Causing industries to collapse is not advantageous,” he said.
Maria Elena Scoppio, director at DG TAXUD, responded that the revised TED aims not to shape health policy but to correct tax distortions across the EU. She said the Commission intends to create a clearer, more coherent system for products that substitute for traditional tobacco.
MEPs repeatedly flagged the scale of illicit tobacco trade across Europe, citing geographic exposure, uneven enforcement capacity, and high consumer tolerance for illicit products. Illegal manufacturing and trafficking drain government revenue, distort competition, weaken tobacco control efforts, and fuel organized crime. Commission figures estimate that illicit cigarette trade causes around €9.0 billion (US$9.5 billion) in lost tax revenue each year, with other illicit tobacco products accounting for an additional €3.5 billion (US$3.7 billion). Lawmakers said these losses must factor into the TED revision as it moves forward.