By Ilona Bērziņa
Amendments to the European Commission’s Tobacco Tax Directive, put simply, aim to raise excise duty rates in order to make tobacco products more expensive and less attractive to consumers. The European Economic and Social Committee (EESC) has also formulated its position on the draft directive. The lion’s share of the amendments — 24 out of 29 in total — were submitted by EESC member and President of European Movement Latvia, Andris Gobiņš. However, alongside this broadly positive public health initiative, there is also a significant downside — the steadily growing problem of tobacco smuggling.
The situation regarding tobacco smuggling is becoming increasingly dramatic. Smuggled cigarettes now account for 23% of the market, while illegal e-cigarettes make up 40%. As a result, Latvia loses millions of euros each year in unpaid excise duty and VAT.
In 2024 alone, Latvia’s losses reached 67 million euros — 31% more than the year before. Across the European Union, according to Oxford Economics data, uncollected excise and VAT revenues totalled approximately 14.9 billion euros, while 39.2 billion cigarettes were consumed illegally, representing 9.2% of the total market.
Smuggling also poses security risksIf anyone believes that Latvia, given its size and population, could not possibly have such a large illegal market, that is either naive or the result of disinformation spread by smuggling lobbyists.
According to official data, customs authorities seized nearly 12 million contraband cigarettes last year. In early February, 1.5 million illegal cigarettes were confiscated from traders in the Dārziņi district of Riga.
Moreover, cigarette smuggling is also a national security issue. The main country of origin of contraband cigarettes is Belarus — where this trade is effectively part of the Lukashenko regime’s “business model” in both Lithuania and Latvia. By failing to radically curb this smuggling, we indirectly support the Belarusian dictatorship.
Another concern is the harm to public health caused by illegal tobacco products and the cost of treating diseases linked to smuggled cigarettes, e-cigarettes and similar products. While society is regularly informed about deaths caused by illegal alcohol and understands those risks, no comparable public data exist regarding illegal cigarettes.
Risks of an uncontrolled marketThese are the first amendments to the Tobacco Tax Directive in many years. Under the proposed rules, the scope of the directive would be expanded to include e-cigarette liquids, chewing and snus tobacco, nicotine pouches, other nicotine products, and raw tobacco.
It is promised that the new directive will improve monitoring of cross-border shopping — when tobacco is purchased in one country but consumed in another.
However, in an uncontrolled market environment, tracking cannot be fully accurate, and public health objectives are also jeopardised. Due to the lack of quality control, illegal tobacco products may contain unacceptable levels of heavy metals, toxins and carcinogenic substances, as well as excessive nicotine.
This is the other side of the coin when discussing higher excise taxes as a deterrent to smoking. While the importance of limiting or eliminating tobacco use for public health is unquestionable, the EESC working group has emphasised proportionality, economic sustainability and the prevention of market distortions in reviewing the directive.
The group also warns of the risks of illegal trade, noting that a rapid or excessive increase in excise duties may fuel smuggling. Therefore, tax increases should be introduced gradually, alongside strengthened customs, police and cross-border cooperation.
Meanwhile, Andris Gobiņš stresses the need to reduce tobacco consumption because of its devastating impact on human life and public healthcare budgets. According to the EESC working group’s position, this should follow the principle “Less harm, less tax.” In other words, tax policy should reflect the varying health risks associated with different tobacco and nicotine products, while allowing Member States sufficient flexibility to integrate this principle into their national tax systems.
Debate will continueAt the time of publication, it was not possible to contact Andris Gobiņš for clarification regarding how the 24 amendments submitted by the EESC might impact efforts to reduce or eliminate smuggling, or how they could affect state budget revenues from tobacco excise duties.
However, as the European Commission continues to seek support in the European Parliament to advance the revision of the EU tobacco legislative framework in 2026, it can be expected that intense debate over the directive’s amendments will continue.
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