Tobacco Taxation

Tobacco Taxation in the European Union

In 2024 alone, taxes on tobacco products raised more than €110 billion for governments across Europe.

In the European Union, extensive tobacco control measures regulate the production, trade, packaging, advertising and taxation of tobacco products. Specifically in terms of taxation, the Tobacco Excise Directive (2011/64/EU) set out the EU legislative framework for pricing and taxation of tobacco products placed on the EU market.

EU legislation on excise duties for manufactured tobacco defines:

the categories of manufactured tobacco products
the principles of taxation
the minimum rates and structures to be applied.

Manufactured tobacco is also subject to the common provisions for excisable goods under EU law.

Directive 2011/64/EU requires Member States to levy a minimum rate of excise duties on cigarettes and sets down minimum excise duty rates for manufactured tobacco other than cigarettes. The structure for taxing “other tobacco products” is slightly different than for cigarettes.

Taxation is a national competency in the European Union, with Member States having the individual freedom to set their own levels of taxation, taking into account the differences between national markets, structures and consumer profiles. As taxation in the EU is mainly a national prerogative, excise rates differ from one Member State to another. You can find the latest Excise Duty table on the website of the European Commission’s Directorate General on taxation (situation as of 1^st July 2021).

Member States can choose between applying a specific component or an ad valorem component, or if they wish, they may apply a mixture of the two.

Minimum rates are set out for three distinct categories of “other tobacco products”

Product Category	Minimum Rate
Fine-cut smoking tobacco	50% of the weighted average retail selling price Or EUR 60 per kilogram
Cigars and Cigarillos	5% of the retail selling price Or EUR 12 per 1000 or per kilogram
Other smoking tobaccos	20% of the retail selling price Or EUR 22 per kilogram

While cigars and cigarillos benefit from lower minimum rates, these excise rates reflect the well-known higher fixed production costs – translated into higher retailing prices – when compared to mass consumption tobacco products.

Tobacco Taxation in the European Union - ECMA

Revision of the Directive 2011/64/EU

The European Commission has proposed to amend Directive 2011/64/EU on the structures of the excise duty on manufactured tobacco products, primarily in order to integrate e-cigarettes and new nicotine products within the scope of the Directive.

ECMA would like to present some key findings from the European Commission’ supporting studies highlighting the specificities of cigars/cigarillos, that, in ECMA’s opinion, should be taken into account when deciding any further action for Directive 2011/64/EU and especially in relation to the EU minima for cigars/cigarillos:

Cigars/cigarillos are niche products and only represent 0.9% of the total tax receipts collected from manufactured tobacco.
The market for cigars/cigarillos has continued to decline since 2005 without significant fluctuations, and has been decreasing in particular since 2011.
The lower excise rates for cigars/cigarillos reflect their well-known higher production costs, due to a labour-intensive manufacturing process compared with cigarettes.
Cigars/cigarillos present a very limited risk and magnitude of cross-border licit or illicit shopping and trade.

1 European Commission: Directorate-General for Taxation and Customs Union, Impact analysis of the review of tobacco excise duty rules – Final report. Volume 1, Publications Office of the European Union, 2025, https://data.europa.eu/doi/10.2778/7227322, Annex D, pp.31-32.

2 European Commission: Directorate-General for Taxation and Customs Union, Impact analysis of the review of tobacco excise duty rules – Final report. Volume 1, Publications Office of the European Union, 2025, https://data.europa.eu/doi/10.2778/7227322, Annex D, p.38.

3 European Commission, Study on Council Directive 2011/64/EU on the structure and rates of excise duty applied to manufactured tobacco, Volume 1, January 2019, p.169.

The weighted average prices of cigars and cigarillos far exceed those of cigarettes, making cigars/cigarillos the least affordable tobacco products on the EU market.
Despite the existence of a tax gap between cigars/cigarillos and cigarettes, the higher average prices of cigars/cigarillos confirm the substantial differences between these categories—especially in terms of manufacturing process and costs.
The existing provisions of the Directive already give Member States the tools necessary to tax cigars/cigarillos in line with fiscal and health objectives, and the European Commission has previously acknowledged (in 2018) that there was little rationale for further EU-level action on the marginal issue of borderline cigarillos. This is consistent with the very low number of Member States perceiving cigars/cigarillos as tax-driven substitution problems, and with evidence that heavier measures would yield only modest benefits while severely harming SME competitiveness—particularly for smaller and family-owned producers in the EU and in third countries where cigar production is often part of cultural heritage.
Cigars/cigarillos generally do not pose tax-driven substitution issues, “either because their market is marginal or because their price is well-above the price of cigarettes, or simply because for their inherent characteristics and consumption patterns, they are only weak substitute of cigarettes”.

As a niche market, there are practical constraints in using tax leverage—especially minimum rates—to reduce cigar/cigarillo consumption, considering that:

They are overwhelmingly smoked on an occasional basis;
They predominantly appeal to more mature consumers—typically higher-income, well-educated, and aware of smoking-related health risks;

4 European Commission: Directorate-General for Taxation and Customs Union, Study on the impact analysis of a review of tobacco taxation rules – Update with recent market and regulatory developments – Final report. Volume 2, Annexes, Publications Office of the European Union, 2025, https://data.europa.eu/doi/10.2778/3555732, (p 72.

5 European Commission: Directorate-General for Taxation and Customs Union, Impact analysis of the review of tobacco excise duty rules – Final report. Volume 1, Publications Office of the European Union, 2025, https://data.europa.eu/doi/10.2778/7227322, Annex D, p.38

6 Report from the European Commission to the Council on Directive 2011/64/EU on the structure and rates of excise duty applied to manufactured tobacco, COM(2018) 17 final, 12 January 2018, p. 5.

7 European Commission, Study on Council Directive 2011/64/EU on the structure and rates of excise duty applied to manufactured tobacco, Final Report, Volume 1, May 2017, p. 174.

8 2025 Impact assessment, p. 108 and p. 110.

9 European Commission, Study on Council Directive 2011/64/EU on the structure and rates of excise duty applied to manufactured tobacco, Volume 1, January 2019, p. 174.

10 Eurobarometer 539, Attitudes of Europeans towards tobacco and electronic cigarettes, June 2024, p. 18.

11 Eurobarometer 539, Attitudes of Europeans towards tobacco and electronic cigarettes, June 2024, p.21.

They are not attractive to, nor associated with, youth uptake or first-time smoking, and do not act as a gateway product.

As such cigars/cigarillos remain a very small segment of overall tobacco consumption.

As concluded by the European Economic and Social Committee, “cigars and cigarillos constitute a distinct category within the tobacco market, representing less than 2% of total consumption. With distinct consumer profiles and occasional use, these products are not substitutes for cigarettes. They are typically used occasionally by a different consumer group and are produced largely by small and medium-sized enterprises (SMEs), often family-owned and rooted in European regions. Excessive uniform increases in EU minimum rates would be disproportionate and detrimental to SME competitiveness, without significant public health benefits. The EESC therefore recommends maintaining a proportionate tax differential and avoiding abrupt harmonisation of minimum excise levels”.

12 Eurobarometer 539, Attitudes of Europeans towards tobacco and electronic cigarettes, June 2024, p. 73.

13 European Economic and Social Committee, Opinion on the Revision of the Tobacco Taxation Directive, ECO/605, recommendation 2.11, February 2026.