Key points:
· The minimum nicotine product tax rates proposed by the European Commission could lead to unintended consequences, like reduced tax revenue, increased illicit trade and negative impacts on lower-income EU member states.
· The current EU tobacco tax regime doesn’t adequately cover new nicotine products, leading to discrepancies between member states. Tobacco Europe advocates stronger, clearer definitions and tax inclusion for these products. At the same time, the group cautions against excessive tax increases that undermine national control over tax rates.
· Tobacco Europe criticizes misleading statements by EU officials, such as claims that vaping creates new health risks comparable to smoking. These statements, it argues, lack scientific justification and hinder balanced public health efforts.
· Tobacco Europe stresses the importance of dialogue between the tobacco industry and EU policymakers, arguing that exclusion of the industry from discussions leads to ineffective policymaking.
· The ongoing UN negotiations around plastic pollution may impact on the tobacco industry, particularly with regard to cigarette filters. Tobacco Europe is monitoring these discussions, which may result in a legally binding treaty by the end of the year.
· Tobacco companies are preparing for the EU Corporate Sustainability Due Diligence Directive by aligning with evolving regulatory standards on sustainability, risk assessments and ethical sourcing.
[Taco Tuinstra, 2Firsts] Scheduled for Sept. 18-20 in Dortmund, Germany, this year’s InterTabac exhibition comes at a critical juncture for the European nicotine sector. On July 16, the European Commission proposed an update to the EU’s tobacco taxation rules that includes higher minimum tax rates, extends the directive’s scope to new nicotine products, and envisions stronger controls on raw tobacco. At the same time, companies are preparing for stricter supply chain due diligence requirements, while closely monitoring discussions about plastic pollution and the next Tobacco Product Directive (TPD).
To help industry representatives understand the challenges and opportunities ahead, Tobacco Europe will share its insights into key EU policy developments at InterTabac. Representing major Europe-based tobacco and nicotine product manufacturers, including British American Tobacco, Japan Tobacco International and Imperial Brands, the organization advocates for responsible EU policymaking in advancing balanced and science-based regulations for tobacco and nicotine products.
Tobacco Europe believes that new, combustion-free nicotine products have the potential to significantly reduce the risks associated with nicotine consumption. However, realizing that potential requires a regulatory framework that simultaneously encourages innovation and discourages underage access to nicotine products, according to the group. Nicotine product legislation, Tobacco Europe argues, should be reasonable, proportionate and evidence based, while complying with the EU Better Regulation principles and ensuring a smooth functioning of EU internal market.
As an official media partner of InterTabac, 2Firsts caught up with Tobacco Europe Director Nathalie Darge, and asked her about the most pressing regulatory issues for the nicotine sector in Europe.
Risking Unintended Consequences
2Firsts: What is your take on the European Commission’s recently proposed update to the Tobacco Taxation Directive?
Nathalie Darge: Tobacco Europe and its members welcome the effort to create greater harmonization across the EU, notably through the establishment of separate excise categories for electronic cigarettes, heated tobacco products and tobacco-free nicotine pouches.
At the same time, we have serious concerns regarding the proposed minimum rates, which we believe are set too high for both combustible tobacco and new nicotine products. The levels suggested go beyond what is justified by consumer-income evolution and economic evidence, risking unintended consequences such as reduced excise revenue and increased illicit trade, particularly in lower-income member states, and ignoring the substantial economic and social footprint of our industry, as illustrated in a 2023 study.
In 2021 alone, tobacco and new nicotine products generated €151.3 billion ($172.61 billion) of total revenues across the EU-27, representing 2.5% of total EU consumer spending. That same year, €107.4 billion—that is, 70 percent of the total spending—was collected into EU-27 budgets in the form of excise taxes and VAT payments, representing near double of the defense spending of France in 2021.
Updating Definitions
2Firsts: What, from the industry’s perspective, are the main shortcomings of the current EU tax regime?
Darge: The current EU Tax regime does not cover the new categories, and member states have started to set up their own excise regimes, meaning that for example we have different treatment of vapor products across the EU. The inclusion into the Tobacco Excise Directive (TED) of new category products has been therefore one of Tobacco Europe’s requests over the years.
We have also seen legal challenges around definitions of the current products included in the TED in the past years with court cases in the member states leading up the preliminary rulings and judgement of the EU’s Court of Justice. The revision and strengthening of the definitions in the current TED are necessary.
As expressed, we are concerned about the proposed minimum rates, not the least since such excessive increases would substantially compromise the tax rate-setting sovereignty of national governments in most member states. This would also hinder those governments from pursuing the nuanced policies required to balance revenues with other political objectives and impose huge price shocks on millions of consumers in the EU.
Further to this, we are concerned about the European Commission’s proposal for a Tobacco Excise Duty Own Resource (TEDOR) to help fund the EU budget, which was published in parallel to the proposal for a revised TED. If adopted, TEDOR would pose a serious threat to national control over taxation by transferring this power towards the EU, raising concerns about taxation sovereignty and core subsidiarity principles [the idea that decisions should be made at the most local level possible—T.T.].
TEDOR would also complicate tax policy and timing by creating more uncertainty and financial pressure on member states, rather than helping to harmonize tax policy across the EU. Last but not least, the proposal would, if adopted, contradict the EU’s public health objectives by sending mixed messages and undermining public health efforts, for instance as enshrined in Europe’s Beating Cancer Plan.
Protecting Taxation Sovereignty
2Firsts: What would an ideal tobacco taxation system look like, and why? What rules should be set at the EU level, and what rules should be set at the member state level?
Darge: While we welcome the revised TED proposal’s effort to create greater harmonization across the EU, notably through the establishment of separate excise categories for new nicotine products, taxation should remain a decision for each member state. TEDOR would transfer this power towards the EU, raising concerns about tax sovereignty and subsidiarity. Shifting control over excise duties to the EU would set a worrying precedent and risk creating unnecessary tensions between national governments and EU institutions.
As for the TED proposal, the proposed minimum rates are too high; rather, EU-level policymakers must respect member states’ ability to tailor excise rates to local economic conditions and purchasing power.
Misleading Statements
2Firsts: Tobacco Europe has raised concerns about EU leaders’ misleading statements about vaping products. Please provide examples of the most problematic declarations and explain why they are wrong.
Darge: We are alarmed by the growing number of dangerously misleading statements about vaping products lacking scientific justification by senior EU officials.
During an exchange in the European Parliament on 12 May, Health Commissioner Varhelyi stated that “vaping has created completely new health risks that are comparable or even bigger than smoking itself,” following claims by his colleague Commissioner [Wopke] Hoekstra that “vaping kills.” Commissioner Varhelyi has also stated that vaping causes “popcorn lung.”
Statements like these constitute dangerous misinformation that misleads citizens and potentially puts lives at risk. These statements and others, such as by the Belgian health minister, raise serious concerns about the direction of EU policy discussions on tobacco and nicotine at a time when the European Commission is still conducting an evaluation of the TPD.
Such statements also reinforce what Tobacco Europe has long argued: Prohibitionist approaches are counterproductive. Product bans, such as nicotine pouches and disposable electronic cigarettes, and overly restrictive measures, including targeting flavors in new nicotine products, do not eliminate demand. In practice, these approaches simply shift products to unregulated and illicit channels, undermining public health objectives, aggravating enforcement challenges and resulting in state revenue losses. In fact, Tobacco Europe and its members would also like to stress that popcorn lung risks are linked to unregulated, illicit products that may contain banned substances, such as diacetyl.
We welcome dialogue with national and EU authorities. The persistence of illicit products is not only due to enforcement gaps, but also to the exclusion of compliant industry stakeholders from regulatory discussions. This prevents policymakers from benefiting from our sector’s expertise, technical insight and practical experience in building effective, enforceable solutions. Tobacco Europe’s members’ commitments go further than what is legally required, following a strict code of conduct that includes additional safeguards and responsible marketing practices to ensure products are sold and used appropriately.
A Call for Balanced, Effective and Proportionate Regulation
2Firsts: What do you expect from the pending revision of the EU TPD?
Darge: Overall, Tobacco Europe and its members support the TPD review, but believe that it remains premature to properly assess the directive’s impact as some measures were fully implemented only recently.
We encourage the European Commission to recognize the principle of tobacco harm reduction and work with the co-legislators and stakeholders to produce a balanced, effective and proportionate regulation, grounded in scientific evidence. EU officials should acknowledge that alternatives to cigarettes can help smokers quit, as repeatedly recognized by the European Parliament. The TPD should maintain a differentiation between conventional tobacco products and new nicotine products based on the significantly reduced risk profile of the latter compared to smoking.
The TPD review must also take into account the substantial economic and social footprint of our industry across EU Member States, as evidenced in this 2023 study. In addition to the already mentioned revenue generated by tobacco products and new nicotine products, our industry also is a large contributor to economic output and a considerable source of employment. In 2021 alone, it contributed €194.5 billion in GDP to the EU—making it comparable to the 16th-largest economy in the EU (i.e., Greece)—and supported over 1.52 million jobs in the EU-27, a number comparable to the population of Munich, Germany.
The Case for Dialogue
2Firsts: Policymakers are discouraged from interacting with the tobacco industry in many jurisdictions. What are the restrictions at the EU level, and how have these impacted on the quality of legislation?
Darge: Interaction with the EU institutions and other EU-level stakeholders is integral to how Tobacco Europe and its members operate. We engage in a transparent manner and conduct open dialogues with policymakers, think tanks, business associations and academia on topics like the manufacturing, sale and use of our products. Industry discussions are essential to ensure a fit-for-purpose regulation of combustible tobacco and new nicotine products.
The FCTC is the first treaty negotiated under the auspices of the WHO that develops a regulatory strategy to reduce tobacco use and exposure to tobacco smoke. Article 5.3 of the FCTC requires that “in setting and implementing their public health policies with respect to tobacco control, Parties shall act to protect these policies from commercial and other vested interests of the tobacco industry in accordance with national law.”
Tobacco Europe and its members consider this article an opportunity to improve the transparency, inclusivity and accountability of decision-making processes, both globally and at the EU level. Unfortunately, this article is misused by some EU policymakers as a reason not to engage with our industry. In reality, the FCTC clarifies that interactions between the industry and government can still take place in a “limited” manner and in full transparency and accountability, but this is regrettably not always the case.
The application of the FCTC must respect EU primary law—namely, the treaties—as it binds all international agreements to which the EU is a party. Article 11 of the Treaty of the EU underscores that the EU institutions shall, by appropriate means, give citizens and representative associations the opportunity to make known and publicly exchange their views in all areas of Union action. Indeed, institutions shall maintain an open, transparent and regular dialogue with representative associations and civil society. This includes our industry.
Spotlight on Plastics
2Firsts: What is the current status of the UN’s attempt to develop an international legally binding instrument on plastic pollution, and how do you expect this initiative to affect the tobacco business?
Darge: Negotiations are ongoing under the mandate of the Intergovernmental Negotiating Committee (INC), with the objective of finalizing a legally binding international treaty on plastic pollution by the end of the year. Positions are still being formed and consolidated ahead of the next negotiation session (INC-5.2), which will take place in Geneva in August.
At the EU level, the Working Party on International Environmental Issues is actively engaged in shaping the EU’s position. We are currently not able to comment on the outcomes of the discussions considering the negotiations will take place in August, but we will monitor this closely.
Promoting a Level Playing Field
2Firsts: How are tobacco companies preparing for the EU Corporate Sustainability Due Diligence Directive? And what does the delay of the transposition deadline mean for your members?
Darge: Our member companies have been actively preparing for the EU Corporate Sustainability Due Diligence Directive, building on their existing sustainability frameworks, internal due diligence policies and supplier engagement. Many leading companies in the sector already conduct risk assessments across their value chains, and have established systems to monitor labor practices, environmental impacts and ethical standards.
Regarding the delay in the transposition deadline, we do not currently foresee a major impact on our members. The companies concerned are already working to ensure alignment with evolving regulatory expectations and broader sustainability goals. However, as implementation approaches, clarity and consistency across member states will be essential to avoid fragmentation and ensure a level playing field across sectors.
2Firsts: In this interview, you identified three primary challenges for the European nicotine sector—the TED, TEDOR and TPD. How would you like to see the industry address those challenges?
Darge: As an open, transparent and responsible industry, we will continue doing our uttermost to seek and promote constructive dialogue with decision-makers at the EU level and in member states, both on TED, TPD and other matters, with a call on ensuring existing regulations are properly enforced and the objective of developing proportional, fit-for-purpose and evidence-based regulations of combustible tobacco and new nicotine products, also acknowledging the substantial economic and social footprint of our industry, as enshrined in the mentioned 2023 study.
For more discussions on international tobacco harm reduction, please click on the image below:
