A European Parliament report published on 8 June 2026 proposes to moderate the pace and scope of tobacco excise duty increases originally put forward by the European Commission, while introducing greater flexibility for member states and safeguards for small and medium-sized enterprises (SMEs). The report, authored by an unnamed political group with a centre-right or conservative economic orientation, contains 87 amendments that collectively pull the directive in a more industry-friendly direction, particularly for cigars, cigarillos, and novel tobacco products.
The report expands the directive's scope to explicitly include "raw tobacco" and narrows the definition of cigarettes to products intended for smoking through a combustion process, which could exclude heated tobacco. The most contested changes involve cigars and cigarillos: the amendments seek to remove the proposed increase in EU minimum rates for these products, arguing they represent a distinct, marginal market segment with limited substitution potential, predominantly produced by SMEs. A new clause mandates a Commission impact assessment on SMEs and employment before any new rates apply.
For heated tobacco and nicotine pouches, the report removes the requirement for a combined ad valorem and specific duty, allowing member states to choose a single taxation method. Nicotine pouches would benefit from a phased implementation with administrative support for SMEs. A major change is proposed for e-liquids: all e-liquids would be taxed regardless of nicotine content to simplify enforcement, removing the previous differentiation based on nicotine concentration.
Transition periods are extended from four to six years, with the first increase delayed from two to three years. The automatic adjustment mechanism for minimum rates would be based on core inflation (excluding energy and unprocessed food) rather than the general HICP, and the price level index adjustment would be applied exclusively within a defined band to limit its impact. The Commission's delegated power to amend rates is deleted entirely.
The medical exemption for nicotine-free products is tightened to require authorisation by a competent Union or national authority.
Stakeholder impact: The report's approach would benefit EU tobacco producers, especially SMEs in the cigar and cigarillo sector, by avoiding steep tax increases and providing longer transition periods. EU consumers would face slower price increases, potentially maintaining affordability and consumption levels. Public health advocates would see the measures as a setback, as slower tax convergence and exemptions for certain products could undermine efforts to reduce smoking rates. National tax authorities would gain flexibility but face complexity in implementing varied taxation methods for heated tobacco and nicotine pouches.
The report will now feed into the Council's deliberations on the directive. The Council must adopt the directive unanimously, and the Parliament's opinion is consultative. Trilogue negotiations are expected to begin later in 2026, with the final directive likely to reflect a compromise between public health objectives and economic concerns for affected industries.