The European Commission's plan for a radical revision of taxation on tobacco and nicotine products, which was recently discussed at the Economic and Financial Affairs Council (Ecofin) in Luxembourg, is causing strong reactions. The plan provides for significant increases in minimum excise duties on cigarettes, as well as the imposition of taxes for the first time on new products, such as e-cigarettes and heated tobacco.
According to the proposal, the minimum tax on cigarettes will increase from 60% to 63% of the weighted average retail price and from €90 to €215 per 1,000 pieces. At the same time, tobacco for rolled cigarettes will be charged with a tax of 62% of the price and at least €215 per kilogram. For new generation products, such as e-cigarettes and heated tobacco, a minimum tax of 45% or €88 per 1,000 pieces is foreseen for the first time from 2028, with a gradual increase until 2032.
If the proposed changes are implemented, the price of the cigarette pack is expected to skyrocket from €4.50-5.00 to €7.00-7.50. Similarly, rolled cigarettes from about €7 will reach €13.
Commissioner for Climate and Clean Development, Wopke Hoekstra, called the reform "imperative", stressing that Europe remains one of the regions with the highest rates of smokers in the world. "There are new products that deliberately target young people, even 15-year-olds, creating a new addiction to nicotine," he noted.
However, at least a dozen member states expressed objections. Italy, Bulgaria and Romania have warned of a possible increase in the illicit tobacco trade, while countries such as Greece, Croatia, Luxembourg and Hungary have argued that the proposed increases are too high.
Smuggling in Cyprus
As expected, these changes will also affect the market in Cyprus. A possible increase in the prices of tobacco products may turn citizens towards cigarette smuggling from the occupied territories.
Recent data have shown an increase in the consumption of illegal cigarettes in Cyprus in 2024, with lost revenue for the public coffers estimated at €22 million.
Specifically, the percentage of illegal cigarettes is estimated at 14.3% of total consumption, increased by 3.29 percentage points compared to 2023 (11.0%). In total, around 130 million illicit cigarettes were consumed, with lost revenue for public coffers reaching €22 million for 2024.
At the European Union level, 38.9 billion illicit cigarettes were consumed, with revenue losses for public coffers estimated at €14.9 billion, up by €3.3 billion compared to 2023.
It is worth noting that a quarter of EU citizens (24%) are smokers. In Cyprus, this percentage stands at 29%, the seventh highest in Europe. The heaviest smokers are found in Eastern and Southeastern Europe, with 37% in Bulgaria, 36% in Greece, 35% in Croatia and 34% in Romania.
