Sofia: Bulgaria charges some of the lowest cigarette duties in the European Union, and that gap explains why a tobacco tax file tabled in Brussels more than a year ago still has not cleared the Council this August.
The European Commission proposed a recast of the Tobacco Taxation Directive on 16 July 2025, alongside a revision of the horizontal excise rules. The proposal lifts minimum rates on cigarettes and fine-cut tobacco and, for the first time, drags heated tobacco products, e-liquids and nicotine pouches into the harmonised framework. The Commission set out the reasoning in its announcement on modernising tobacco taxation, and pencilled in 2028 as the application date with a four-year transition for the sharpest increases.
Ministers have argued about the numbers ever since. Higher-rate capitals in the north and west want the floor raised because cheap product from lower-rate member states keeps arriving in shoppers’ car boots. Lower-rate capitals answer that fast convergence would push consumers toward the illicit market rather than out of the habit, and would cost them revenue they have already budgeted.
What turns an ordinary excise argument into a budget argument is the second file sitting beside it. The Commission’s Own Resources Decision for the 2028 to 2034 period proposes a Tobacco Excise Duty Own Resource, which would channel a slice of national tobacco receipts straight into the EU budget. The same package adds revenue streams tied to emissions trading, the carbon border mechanism, uncollected electronic waste and a lump-sum contribution from large companies.
The Commission has been explicit that this tobacco own resource does not legally depend on the directive recast passing. Politically, the two travel together, because ministers who dislike a higher excise floor dislike it considerably more once part of the proceeds leaves their treasury. The European Parliament has hardened that link by demanding at least 60 billion euros a year in genuine new own resources as its condition for backing an ambitious long-term budget, a position reflected in its mapping of existing and potential own resources.
Unanimity is the obstacle that matters. Tax files and the Own Resources Decision both require every member state to agree, and the Decision then needs ratification in 27 national parliaments before a single euro moves. That sequence takes years even when capitals are content, and nobody in the Council currently claims they are.
The health argument sits uneasily inside all this. Public health bodies support higher minimum rates because price remains the most reliable lever on consumption, particularly among younger smokers. Industry groups and some advisory bodies counter that steep duties on newer nicotine products treat them as equivalent to cigarettes and remove the price incentive to switch away from combustion. Neither side has persuaded the other, and the Council has not chosen between them.
A four-year transitional period is the compromise already visible in the text. It lets lower-rate capitals climb toward the new floor slowly enough to keep border trade manageable, and it gives higher-rate capitals a date to point at. Whether that buys a unanimous vote is the question the autumn presidency inherits.
For now the tobacco tax file behaves like most unanimity dossiers. It moves in technical working groups, it does not move in the Council, and the budget arithmetic that leans on it stays provisional.
