TED Revision – European Commission Proposes Reform of Tobacco Taxation

On 16 July 2025, the European Commission adopted a proposal to recast the Tobacco Excise Directive (TED). This marks the first comprehensive attempt to update the EU tobacco excise framework since 2011.

The proposal aims to expand the excise system to include e-liquids, heated tobacco, and nicotine pouches, and to introduce EU-wide minimum tax levels for these products.

Member States would retain full authority to set higher national rates but would no longer be able to apply rates below a common EU threshold.

Nicotine pouches are available in 17 EU Member States, and 9 of them apply excise duty, while several others restrict or prohibit their sale.

1. Why the Reform Matters

The current Tobacco Excise Directive, adopted in 2011, focuses on traditional tobacco products such as cigarettes, cigars, and fine-cut tobacco, leaving newer nicotine categories regulated under divergent national frameworks.

The Commission’s revised proposal introduces several key changes:

• Extended scope – e-liquids, heated tobacco, and nicotine pouches are included for the first time under EU-wide excise rules
• Minimum EU tax levels – establishing a common baseline taxation across the Single Market
• Updated cigarette and cigar rates – reflecting inflation and shifting consumption patterns

EU Member States differ significantly in whether they tax e-liquids, in the excise duty levels applied, which range from high rates to zero or no tax, and in how nicotine and non-nicotine products are treated.

Most Member States apply excise duty to e-liquids, whereas only a few do so for components. 

2. Indicative Minimum Excise Rates (Proposed)

Implementation phasing: 2030–2031 transitional period; full rate from 2032.

By modernising the tax base and updating minimums for cigarettes and cigars, the structure would better reflect current consumption behaviour and inflationary trends.

For manufacturers and distributors, it would directly influence pricing, compliance, and supply-chain strategies.

3. Divergent Member State Reactions

Member States have reacted with a mix of support and caution.

Sweden has raised concerns about the inclusion of nicotine pouches in the excise system, citing its long-standing snus exemption agreed upon during EU accession, and warning that higher taxes could undermine its national harm-reduction model. Swedish officials advocate a risk-proportionate approach rather than uniform taxation.

Italy and Greece, according to reports from Financial Times and EUnews, have expressed reservations about the overall tax increase and the proposed redirection of part of national excise revenues to the EU budget, arguing that excessive taxation could drive illicit trade and harm domestic industries.

Other Member States have called for a balanced transition, aiming to reconcile fiscal needs with public health objectives.

Because tax directives require unanimous approval by the Council of the EU, even a single dissenting vote can block adoption. Negotiations could be prolonged, as adoption requires unanimity, with Member States focusing on tax differentiation, transition timelines, and fiscal implications.

4. The TEDOR Mechanism: A Complementary Budget Proposal

Alongside the directive, the Commission has also proposed a separate initiative, the Tobacco Excise Duty Own Resource (TEDOR).

Under this plan, 15% of each Member State’s minimum excise base would be allocated directly to the EU budget to help finance the 2028–2034 Multiannual Financial Framework (MFF).

The Commission estimates that TEDOR could generate approximately €11.2 billion annually, creating a new “own resource” to support the EU’s long-term fiscal sustainability.

Although TEDOR and the TED revision are legally independent, they are politically linked, representing a step toward a more integrated EU fiscal system.

5. Industry Impact and Outlook

If adopted, the proposal would, for the first time, create a common minimum excise structure for all nicotine products across the European Union.

Its implications would be broad and multifaceted:

Regulatory – Reduced internal market fragmentation and greater legal certainty

Fiscal – Nicotine market diversification sustains excise revenue despite declining cigarette use

Industrial – Adjustments in pricing, production, and compliance frameworks

Public Health – Taxation expected to influence consumer transitions across product categories

Debates within the Council and European Parliament are expected to focus on tax proportionality, product differentiation, and transitional implementation. Although the path to unanimous approval may be lengthy, the direction of policy is unmistakable: a more coherent, forward-looking fiscal framework for all nicotine products across the European Union.

For OEM/ODM cooperation on e-liquid and vape flavor solutions, please email us at service@hangsen.com

Learn More

TPD III Outlook: Regulatory Trends and Insights on Europe’s E-Cigarette Industry

Flavor Bans: E-Cigarette Flavor Restrictions in Europe

A Guide to Tobacco Vape Flavors