The European Economic and Social Committee (EESC) has issued a formal opinion cautioning that abrupt or excessive hikes in excise duties on tobacco and nicotine products could drive consumers toward illicit markets. While supporting the revision of the Tobacco Taxation Directive, the advisory body emphasizes the need for gradual, risk-proportionate reforms that distinguish between combustible tobacco and lower-risk alternatives to achieve the goals of Europe’s Beating Cancer Plan.
Balancing Fiscal Policy and Public Health
In an opinion adopted during its plenary session on February 18-19, the EESC—an advisory body to EU institutions—expressed support for updating the 2011 Tobacco Taxation Directive but warned of the unintended consequences of aggressive tax increases. The committee argues that "abrupt or excessive" adjustments risk eroding fiscal revenues and weakening the very public health outcomes they intend to improve.
The following table summarizes the EESC’s strategic recommendations versus the identified risks of excessive taxation:
| Factor | EESC Recommendation | Risk of Excessive Taxation |
|---|---|---|
| Tax Implementation | Gradual and predictable reforms. | Abrupt and destabilizing hikes. |
| Product Differentiation | "Less harm, less tax" (Risk-proportionate). | Uniform high taxation across all categories. |
| Market Impact | Encourages switching to reduced-risk products. | Fuels illicit trade and smuggling. |
| Fiscal Outcome | Stabilizes and protects state revenue. | Erodes revenues via black-market growth. |
The "Less Harm, Less Tax" Principle
A central pillar of the EESC’s position, drafted by rapporteur Matteo Borsani and co-rapporteur Małgorzata Anna Bogusz, is the advocacy for a risk-proportionate taxation model. The committee argues that non-combustible and reduced-risk products—such as nicotine pouches and heated tobacco—should face lower duties than traditional combustible cigarettes. This approach aims to incentivize adult smokers to transition away from the most hazardous forms of nicotine use, aligning with the Europe’s Beating Cancer Plan goal of a tobacco-free generation by 2040.
The opinion also calls for clearer legal definitions to distinguish emerging products from traditional cigarettes. Greater flexibility for member states in structuring excises, such as unit- or weight-based options, is recommended to ensure regulations remain "proportionate and workable" across diverse European markets.
Addressing the Illicit Trade Challenge
The EESC highlights that illicit trade already costs the EU billions in lost revenue annually. Steep tax hikes, particularly in lower-income member states or border regions, create significant price differentials that drive cross-border smuggling. To counter this, the committee recommends that any tax adjustments be paired with robust enforcement, including:
- Enhanced customs cooperation between member states.
- Cross-border anti-smuggling initiatives.
- Improved monitoring systems for raw tobacco to prevent diversion into illegal channels.
In Sweden, consumer organizations have echoed these concerns, pointing to the country's success in achieving one of the EU’s lowest smoking rates through the use of snus and pouches. They warn that harmonized, high EU nicotine taxes could reverse this progress by pushing consumers toward unregulated sources.
Expert Verdict: A Call for Balanced Reform
The EESC’s stance adds significant weight to the argument for a balanced and evidence-based revision of the Tobacco Taxation Directive. By prioritizing gradual implementation and risk-proportionate duties, the EU can protect its fiscal interests while effectively steering public health toward harm reduction. As negotiations continue in the Council—where unanimity is required—the challenge for policymakers will be to harmonize taxes without inadvertently fueling the very illicit markets that undermine European law and safety.
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