On Wednesday, the European Commission unveiled two major proposals: a long-awaited revision of the Tobacco Taxation Directive and a brand new measure known as the Tobacco Excise Duty Own Resource (TEDOR).
The revision of the Tobacco Taxation Directive aims to raise minimum excise duty rates—taxes levied on specific goods, such as tobacco, typically at the point of production or import.
Under the new rules, the scope of the directive would also be broadened to include e-cigarette liquids, chewing and nasal tobacco, nicotine pouches, other nicotine products, and raw tobacco.
The TEDOR proposal, presented separately as part of the EU’s new €2 trillion long-term budget framework, would introduce a fresh stream of EU revenue independent of contributions from member states.
Under TEDOR, a uniform 15% call rate would apply to the quantities of manufactured tobacco and related products released for consumption, based on the minimum excise rate applicable in each country.
The Commission expects TEDOR to generate approximately €11.2 billion annually. However, it remains unclear whether the revenue will be used to repay borrowing under the NextGenerationEU fund or to reduce national contributions to the EU budget for new priorities.
“Own resources have no specific dedication. They always enter the yearly budget without being earmarked,” an EU official said. The official added that the revised tobacco taxation directive is "complementary but independent" from the TEDOR proposal.
First major tobacco legislative tweaks in years
These two proposals mark the first significant EU tobacco taxation legislation in years. A broader update of EU tobacco rules—once anticipated during Commission President Ursula von der Leyen’s previous term—has been delayed and is currently on hold.
The "Europe’s Beating Cancer Plan", a flagship health initiative of the von der Leyen Commission, underscored the importance of taxation in reducing tobacco use, particularly among young people.
However, repeated delays have raised questions about the influence of the tobacco industry on policymaking.
The revised Tobacco Excise Directive will adjust minimum excise duties for traditional tobacco products, which currently date back to 2010.
Under EU law, member states must impose a minimum rate on cigarette excise duties, though they are allowed to exceed that rate based on national priorities.
With the new revised rules, the Commission wants to set excise duty on cigarettes at no less than 7.5% and no more than 76.5% of the total tax burden.
The revision also aims to tighten controls on raw tobacco, which is often diverted into illicit markets.
Cross-border shopping—when tobacco is bought in one country but consumed in another—would now be better tracked and accounted for. The EU plans to expand the current electronic system used to monitor excise goods movement to also include raw tobacco under its monitoring.
Next steps: challenging path ahead
Both the revised Tobacco Taxation Directive and TEDOR face significant political hurdles.
In the EU, tax legislation can only be adopted by unanimous agreement in the Council of the European Union, where all member states are represented.
The European Parliament is consulted but does not have legislative power in this area.
Countries such as Italy and Greece have already voiced opposition to any tax-driven price increases on tobacco products.
However, momentum may be building: in March 2025, health ministers from 12 member states sent a letter to EU health Commissioner Olivér Várhelyi urging more decisive action on tobacco and novel nicotine products.
Despite growing support, reaching unanimity remains a major challenge, especially for revenue-generating measures like TEDOR, which also require approval by all member states in line with their national constitutional procedures.
