Tobacco, taxes, and tensions: EU reignites policy debate on public health and budget priorities

The EC to bolster the EU’s “own resources,” helping to fill gaps in the Union’s long-term budget with €14 billion from the pockets of European nicotine users. On July 16, the EC is expected to discuss the Tobacco Excise Directive (TED) proposal as part of the Multiannual Financial Framework (MFF) talks.

As the European Commission prepares to overhaul its fiscal framework in line with mounting geopolitical, health, and climate demands, a controversial component has returned to the spotlight: tobacco taxation. Against a backdrop of budgetary reform and intense policy debates, the Commission’s revival of the Tobacco Products Directive (TPD) is generating friction within institutions and across Member States.

At the heart of this renewed debate lies a fundamental dilemma: how to balance the EU’s public health agenda with its growing fiscal needs — and to what extent taxation and regulation of tobacco products can serve both.

TPD under review: A long-delayed overhaul

The European Commission's latest Activity Report by DG SANTE reveals that the long-anticipated evaluation of the Tobacco Products Directive (2014/40/EU) and the Tobacco Advertising Directive (2003/33/EC) remains in draft stage. The Staff Working Document (SWD) is now scheduled for finalisation only by Q2 2026, due to delays linked to the complexity of evidence gathering and legislative review.

This is no minor delay. These directives underpin the EU’s regulation of tobacco marketing, labelling, cross-border advertising, and increasingly, alternative nicotine products such as e-cigarettes and pouches. With new products proliferating — and younger demographics increasingly targeted through social media and influencers — critics argue that the legislation is significantly out of date.

A budget hole and a tobacco fix?

The evaluation—stalled since 2023—was essential for updating EU tobacco regulations. Although existing tobacco laws are considered outdated, European countries remain divided on how to move forward.

According to Politico, the EC is actively exploring own resources to fund the bloc’s next long-term budget (Multiannual Financial Framework, MFF), including tobacco excise as a direct EU-level revenue source.

This move, championed by Commission President Ursula von der Leyen, follows pressure to plug fiscal gaps caused by COVID-19 recovery efforts, Ukraine support, and the Green Deal. Yet it has sparked tensions among Member States.

Health vs revenue: Compatible or contradictory?

On Wednesday 16 of July , the European Commission is expected to discuss the proposed revision of the Excise Duty Directive (TED) during the weekly meeting of the College of Commissioners, as part of the Multiannual Financial Framework (MFF) negotiations—the blueprint for the EU’s next seven-year budget.

The revision could reportedly generate up to €14 billion in annual revenue for the EU. Commission officials have indicated that a portion of this income may be allocated to strengthen the EU’s “own resources,” helping to address shortfalls in the long-term budget.

That same day, European farmers staged a protest at the European Commission headquarters in Brussels, opposing the dismantling of the Common Agricultural Policy (CAP) into a single fund, as well as the hastily presented proposal for the next CAP—introduced in July alongside the post-2027 Multiannual Financial Framework (MFF)—which lacks clarity on funding, governance, and meaningful consultation with the agricultural sector.  

The agriculture sector, where tobacco growers are under negative pressure and subject to constant ideological attacks coming from public authorities and nongovernmental organizations. Over 65,000 people were directly employed across the EU-27 in the manufacturing of traditional tobacco and new nicotine products in 2021.

Tobacco growers will be hit twice: first, from the restructuring of the CAP as farmers, and second, from the new TED, which will increase prices for consumers and make the European industry less attractive and competitive compared to foreign producers and growers.
The Commission maintains that aligning tax policy with public health outcomes is not only legitimate but essential. Higher tobacco taxes are proven to reduce consumption, especially among price-sensitive groups like youth. But the dual-use of excise tax — as both a deterrent and a revenue stream — raises ethical and operational questions.

Should the EU become dependent on revenue from a product it also seeks to eliminate?

The delay in revising the TPD  adds to the policy confusion. Several Member States have introduced national-level regulations on novel tobacco and nicotine products — often inconsistently. France, for example, has pushed hard for flavour bans in disposable vapes, while others such as the Czech Republic maintain a more liberal approach.

“There is an urgent need for harmonisation,” said Dr. Clara Jürgens, public health law specialist at the University of Cologne. “Without updated EU-level legislation, we're witnessing a patchwork of regulation that benefits neither consumers nor regulators.”

The commercial backlash: Industry and economic concerns

Tobacco companies and affiliated sectors are bracing for a storm. Industry bodies warn that punitive tax proposals, if rushed or misaligned with national priorities, could backfire.

“The EU must avoid the trap of ideological overreach,” said Henri-Paul Veron, a spokesperson for the European Association of Tobacco Retailers. “Excessive taxation will fuel illicit trade, undermine legal business, and paradoxically reduce government revenue.”

A test of EU unity and purpose

The intersection of health policy and fiscal need has rarely been so visible or so fraught. As the Commission readies its SWD and faces down inter-institutional disagreements, the road to reforming the TPD and TED  is long — and politically treacherous.

Whether the EU can modernise its regulatory framework while maintaining trust, transparency, and cohesion remains an open question. But one thing is clear: tobacco — and its alternatives — are no longer just a health issue. They are a litmus test of the EU’s vision for governance, subsidiarity, and solidarity.

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