Cigarette Taxes in Europe, 2024

Cigarette smokers in the European Union pay far more in excise taxes than they do for the cigarettes themselves. The EU Tobacco Tax A tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. Directive requires all Member States to levy a minimum excise taxAn excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections. on cigarettes and other tobacco products. EU countries levy a specific ad quantum cigarette tax (a fixed amount per pack of cigarettes) and an ad valorem excise tax (an additional percentage of the retail sales price).

The current minimum cigarette excise rates in the EU are €1.80 ($1.95) per 20-cigarette pack, and the minimum total excise duty is at least 60 percent of the national weighted average retail price, where the minimums have remained since 2014. Member States that levy a higher specific rate of at least €2.30 per pack do not need to meet the 60 percent requirement. The two excise taxes are levied before adding the broadly applied value-added taxes (VATs).

The EU Directive only establishes minimum rates, but all countries levy higher rates.

In 2024, the average EU Member State levied cigarette excise taxes that exceeded 80 percent of the retail sales price. This means the taxes increased consumers' average prices by more than 450 percent.

This map illustrates the wide variance in cigarette excise taxes across EU Member States. The highest tax in the EU is levied in Ireland at €9.92 ($10.72) per pack of 20 cigarettes, followed by the Netherlands at €7.66 ($8.28) and France at €7.45 ($8.05).

The lowest excise tax is levied in Bulgaria at €1.92 ($2.08) per pack of 20 cigarettes. The next lowest taxes are imposed in Poland and Croatia at €2.33 ($2.52) and €2.52 ($2.72), respectively.

The excise taxes are levied in addition to VATs applied to cigarettes. Considering the total taxes, the average tax share of 2023 weighted average retail prices in EU countries ranges from 67.5 percent in Germany to 110 percent in the Netherlands. The data are calculated and published by the European Commission using weighted average prices (WAP) from the previous year, pursuant to Article 8 (Subsection 2) of the Tobacco Tax Directive. Taxes as a percentage of WAP are less than 100 percent for all countries for which we have data using same-year average retail prices.

Cigarette taxes are regressive, both because excise taxes are generally regressive and because smoking is more prevalent in people with lower incomes. The narrow base and declining consumption trend make cigarette excise taxes volatile sources of revenue, and those revenues are often directed to spending entirely unrelated to smoking. Cigarette tax increases tend to invite cigarette smuggling and drive consumers to illicit markets.

KPMG estimates that more than 35 billion counterfeit and contraband cigarettes were consumed in the EU in 2022, amounting to 8.2 percent of total cigarette consumption-and a loss of €11.3 billion ($12.2 billion) in tax revenues. The largest markets for illicit cigarettes as a percentage of total consumption were in France (32 percent), Ireland (24 percent), and Greece (21 percent). France accounts for almost half of illicit consumption in the EU.

Major updates to the EU Tobacco Tax Directives were considered but have been put on hold indefinitely. As cigarette smoking continues, and consumption of counterfeit and contraband cigarettes continues to grow, the European Commission may seek to reconsider updates to the EU tobacco tax policy.

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