The Cypriot EU Council Presidency’s latest attempt to advance the EU’s tobacco tax reform was put to the test on Wednesday 21 January, when officials convened in the Council’s Working Group on Tax Questions.
Intended to inject momentum into the long-stalled revision of the Tobacco Excise Tax Directive (TED), the
exchange around the new compromise text instead exposed just how far member-states remain from a shared position on one of the Union’s most sensitive public-health and fiscal dossiers.

The warning signs are already surfacing: by floating a lower minimum excise rate alongside extended
transitional periods, the Cypriot TED draft risks accommodating the positions of national governments closely aligned with tobacco industry interests, at precisely the moment when Big Tobacco is intensifying its lobbying efforts. Left unresolved, this industry-fueled clash of EU capitals threatens to undermine the entire TED reform process.

Moving forward, the European Commission must show leadership, working with allied member-states to help Council presidencies sustain ambition in a long-overdue, World Health Organization (WHO)-aligned overhaul of the bloc’s tobacco control framework.

Cyprus’s compromise arrives in polarised climate

The Cypriot Presidency’s latest TED text stems from the European Commission proposal presented in July 2025 to drag an outdated tax framework into line with today’s tobacco and nicotine market, with sustained tobacco industry pressure largely responsible for the past decade’s regulatory inertia. The EU executive aims to lift minimum duties on conventional tobacco to reduce wide intra-EU disparities, while extending EU-wide excise floors to novel products including e-cigarettes, heated tobacco and nicotine pouches.

Predictably, the plan has split member-states into opposing camps, with ambitious reformists like France, Spain, Germany, Ireland and the Netherlands arguing that stronger, more uniform taxation is essential to reducing consumption and delivering EU health goals. Meanwhile, countries including Italy, Romania, Greece and Hungary continue to emphasise economic exposure and enforcement risks. The latter camp’s ‘caution’ is no coincidence: in recent years, Big Tobacco companies have poured billions into factories in these countries, embedding jobs and economic dependencies to gain political leverage and loyalty in Brussels.

Amid this polarised climate, Cyprus’s Presidency has tried to reframe the debate, leaving the Commission’s basic structure intact while proposing lower rates and longer implementation timelines, presenting these adjustments as a pragmatic route to consensus rather than political retreat. Yet, Nicosia’s stance is playing into the hands of tobacco industry-aligned member-states, which, in welcoming the diluted proposal, parroted the industry’s false claim that ambitious tax increases would fuel illicit trade and erode excise revenues. Debunking this narrative, Professor Hana Ross of the Vienna Institute for International Economic Studies presented new research at a European Respiratory Society (ERS) event in late January which found no link between cigarette excise tax levels and illicit trade in the EU.

Moreover, public health-focused EU capitals maintain that weakening minimum rates or stretching transition periods would hollow out the TED, and that only decisive tax harmonisation can curb price gaps, limit crossborder purchasing and reduce consumption across the single market. Concerningly, the tobacco industry is doing everything in its power to drown out these calls, deploying an increasingly intense lobbying effort to derail the TED reform.

Big tobacco’s desperate bid to keep policy grip

In late January, the European Commission publicly sounded the alarm on this latest wave of tobacco industry interference, with officials that the EU executive had “probably” faced a coordinated effort to manipulate its public consultation results on the TED reform. In the final hours of the feedback period, thousands of anonymous, near-identical submissions appeared, echoing industry talking points, alongside fabricated responses falsely attributed to public health experts expressing opposition to the proposed overhaul.

This is a familiar playbook for Big Tobacco, which has already succeeded in delaying the TED for years,
alongside the other pillar of EU tobacco control, the Tobacco Products Directive (TPD). By undermining the ambitious reforms needed to bring both frameworks into full compliance with the WHO Framework Convention on Tobacco Control (WHO FCTC), the industry has protected profits derived from EU tax gaps, an ineffective traceability system it helped weaken during the TPD’s 2014 revision, and the surge in parallel trade that has flowed from sustained policy obstruction.

In practice, tobacco companies deliberately flood low-tax markets such as Luxembourg, facilitating the
channeling of cheap products into higher-tax countries including France and the Netherlands. The resulting parallel trade is then cynically used to argue against EU-wide tax increases, even as it allows the industry to bypass stronger national tax regimes. This distortion is further entrenched by the industry’s sway over the EU traceability system launched in 2019, where pre-implementation lobbying helped shape the Commission’s choice of private operators.

Crucially, several of the firms involved in the EU system maintain direct or indirect links to, and financial
reliance, on the tobacco industry, undermining the scheme’s independence in violation of the WHO FCTC and its Protocol to Eliminate Illicit Trade in Tobacco Products. For example, Swiss firm Inexto acquired the
infamous Codentify traceability system – originally developed by Philip Morris International – while Dentsu Tracking inherited Codentify links through its takeover of Blue Infinity, one of Codentify’s co-creators. Another provider, PSQR, emerged from FractureCode, a Danish tobacco industry front group.

No time to let guard down

As the Commission’s DG TAXUD has recognised, the EU system has failed to curb illicit trade or stem
mounting excise and VAT losses, laying bare the corrosive influence of tobacco interests on policies meant to protect public health. The EU must not waste this moment to finally correct the tax imbalances long exploited by Big Tobacco and implement measures such as fully independent traceability and country quota mechanisms to tackle parallel trade – as required by the WHO FCTC and its Protocol.

With the latter measures falling within the scope of the TPD, it is essential that its revision is not sidelined as attention shifts to the TED, which is undeniably the immediate battleground. In the months ahead, the
Commission must hold its nerve and build a coalition with NGOs and MEPs ahead of the European Parliament’s opinion expected in June, which, while not binding, will carry significant political weight.

The TED reform must also remain firm on novel nicotine products, including smokeless tobacco and nicotine pouches, which the industry continues to market as safer alternatives to combustible cigarettes. As Health Commissioner Olivér Várhelyi rightly asserted in January, these products do “not reduce health risks” and can act as a “gateway to nicotine addiction and, ultimately, to smoking.” Backing this position, Frank Borm of the Netherlands Cancer Institute affirmed at the ERS conference that “e-cigarettes are a trojan horse to get young people addicted,” while Professor Thomas Münzel of the European Society of Cardiology cited a new cardiovascular study whose conclusions point to the need for nicotine tax hikes across all products to counter the tobacco industry’s efforts.

After a decade of drift, the choice facing Europe is now stark. The TED and TPD revisions can either become vehicles for genuine public health progress or another casualty of tobacco industry pressure and political caution. In the crucial months to come, EU member-states and the Commission must reject dilution by stealth, and commit to reform that matches the scale of the harm tobacco continues to cause across Europe.