EU faces opposition from Portugal over proposed hike in tobacco taxes
The European Commission's proposal to equally tax cigarettes and less harmful smoking products like e-cigarettes, heated tobacco, and nicotine pouches has sparked controversy, particularly in Portugal. The Portuguese Ministry of Finance, led by Joaquim Miranda Sarmento, has expressed concerns about the potential impact on national tax revenue.
The Commission's proposal aims to raise minimum excise taxes on all tobacco products, including a dramatic increase of up to 258% on rolling tobacco and a 139% increase on cigarettes. This move, while intended to reduce disparities in excise tax rates across member states, has raised concerns in Portugal and other countries about the potential loss of excise revenue due to market shifts and harmonization of rates across the EU.
The proposal also aims to reduce price differences that may fuel illicit trade and protect public health by curbing tobacco use, supporting Europe’s Beating Cancer Plan and tobacco-free generation goals. However, Portugal fears that harmonizing these taxes, and especially taxing less harmful products at the same level as cigarettes, may lead to a significant reduction in national excise tax revenue.
The controversy revolves around the European Commission’s intent to apply equally high taxes on all tobacco and related products, which clashes with Portugal’s concern about losing excise revenue due to market shifts and harmonization of rates across the EU. This debate reflects the tension between public health ambitions and national fiscal interests as the EU modernizes tobacco taxation policies.
The controversy is further complicated by the Brussels proposal's potential to increase tobacco taxes, which may lead to price increases and stimulate illicit trade. The proposal also includes an own resources proposal that transfers part of the excise duty on tobacco collected by Member States to the EU budget.
The Portuguese Ministry of Finance believes that less harmful forms of smoking should be subject to less severe taxation to encourage smokers to switch to these products. The Ministry warns that the European Commission proposal could be an economic policy error, potentially resulting in a loss of national tax revenue of up to €1.5 billion for Portugal.
The Brussels proposal does not specifically address the concerns raised by the Portuguese Ministry of Finance about the equal taxation of all forms of smoking. The proposal will affect two legal instruments: the Tobacco Taxation Directive and the Council Directive on the general arrangements for excise duties.
The European Commission presented the Multiannual Financial Framework 2028-2034 (MFF 28-34) on July 16, which includes an own resources proposal. This proposal transfers part of the excise duty on tobacco collected by Member States to the EU budget, as stated earlier in the article.
The debate over the European Commission’s proposal to equally tax tobacco products highlights the delicate balance between public health priorities and economic and fiscal interests of member states. As the EU moves towards modernizing tobacco taxation policies, it is crucial to consider the potential impact on national tax revenues and market dynamics.
- The European Commission's proposal to equally tax all tobacco products, including less harmful alternatives, has stirred concerns among some member states, particularly Portugal,, due to potential losses in excise revenue.
- The anticipated revenue loss for Portugal, estimated up to €1.5 billion, has been highlighted by the Portuguese Ministry of Finance as a significant concern regarding the proposal's equal taxation of all smoking products.
- The Brussels proposal, which also includes an own resources proposal that transfers part of the excise duty on tobacco to the EU budget, does not specifically address the concerns raised by the Portuguese Ministry of Finance about the equal taxation of all forms of smoking.
