Tobacco: record tax revenue of 15.6 billion in Italy. EU rules seek a new balance

On tobacco taxation, the EU has yet to reach a clear conclusion. The European framework is still seeking a new balance, with the revision of the directives, whilst in Italia many decisions have been brought forward; tax revenue from cigarettes and other products – including excise duties, VAT and consumption taxes – reached a record high last year of 15.6 billion (compared with 13.9 in 2019), and the 2026 Budget Law has restructured the tax schedule, with increases spread over a three-year period.

There are two areas of reform currently underway at European level. The recast of the Tobacco Products Directive (Tobacco Products Directive 2014/40/EU), which regulates product characteristics, labelling, ingredients, health warnings, cross-border distance sales and product traceability. And the update to the TED (Tobacco Excise/Taxation Directive 2011/64/EU), which sets out the structure and minimum rates of excise duty on manufactured tobacco, and is supplemented by Directive 2020/262/EU on the general excise duty regime (movement, tax warehouses, cross-border purchases by private individuals).

The process for the TPD has only just begun: following the closure of the call for evidence on 15 June, the public consultation launched by the Commission will remain open until 14 August: the contributions will be incorporated into the impact assessment that will accompany the legislative proposal in the coming months.

The process of amending the TED is more complex; due to its fiscal nature, it requires unanimity in the Council of the EU. The Commission’s proposal – COM(2025) 580, a recast of Directive 2011/64, accompanied by COM(2025) 581, which amends Directive 2020/262 – was presented almost a year ago, on 16 July 2025, to update and harmonise the excise duty framework. This is because the minimum rates set in 2011 have lost their effectiveness due to inflation and price trends; and because the market has seen the introduction of innovative products, which often do not fit into traditional categories.

The aim is therefore to increase the EU minimum rates and extend the scope of application to e-cigarette liquids, heated tobacco products and pouches (nicotine pouches), and include raw tobacco within the excise duty control system. On the other hand, alternative products currently account for around 13 per cent of the sector’s market value. Whilst the current minimum rates – as Commissioner Wopke Hoekstra stated – ‘are not sufficient to combat cross-border trafficking, counterfeiting and tax evasion, which cost us 13 billion euros every year”. Brussels – which is pursuing the goal of a tobacco-free generation by 2040 – maintains that around 40 per cent of the decline in smoking prevalence among Europeans can be attributed to the impact of tax policies. According to the WHO, a tax increase that raises tobacco prices by 10 per cent would reduce consumption by around 4 per cent in high-income countries and by up to 8 per cent in most low- and middle-income countries.