Tax Policy – Cigarette Taxes in Europe
To ensure the functioning of its internal market, the EU sets a minimum excise duty on cigarettes. It consists of a specific component and an ad valorem component, resulting in a minimum overall excise duty of €1.80 (US $2.02) per 20-cigarette pack and 60 percent of an EU country’s weighted average retail selling price (certain exceptions apply). On top of excise duties, all EU countries levy a value-added tax (VAT) on cigarettes.
Taking into account both excise duties and VAT, the average share of taxes paid on a 20-pack of cigarettes ranges from 89.5 percent in Finland to 69.3 percent in Luxembourg (of the weighted average retail sales price).
Ireland and the United Kingdom levy the highest excise duties on cigarettes in the European Union (EU), at €8.00 ($8.95) and €6.83 ($7.64) per 20-cigarette pack, respectively. This compares to an EU average of €3.22 ($3.61). Bulgaria (€1.80 or $2.01) and Slovakia (€2.07 or $2.32) levy the lowest excise duties.
KPMG estimates that the European Union consumed €38.9 billion ($46.4 billion) of counterfeit and contraband (C & C) cigarettes in 2019, representing 7.9 percent of total cigarette consumption and a loss of €9.5 billion ($10.6 billion) in tax revenues. The largest consumers of C & C cigarettes as a percentage of total consumption were Greece (22%), Ireland (18%), Lithuania (18%), and the United Kingdom (17%).
| Excise Duty | Total Tax (Excise Duty and VAT) | Weighted Average Retail Sale Price (Including Excise Duty and VAT) | Tax as a Share of the Weighted Average Retail Sales Price | ||||
|---|---|---|---|---|---|---|---|
| EUR | USD | EUR | USD | EUR | USD | ||
| Austria (AT) | €3.06 | $3.42 | €3.90 | $4.37 | €5.06 | $5.66 | 77.1% |
| Belgium (BE) | €3.83 | $4.29 | €4.92 | $5.51 | €6.25 | $7.00 | 78.7% |
| Bulgaria (BG) | €1.80 | $2.01 | €2.25 | $2.52 | €2.74 | $3.06 | 82.4% |
| Croatia (HR) | €2.13 | $2.38 | €2.85 | $3.19 | €3.60 | $4.03 | 79.1% |
| Cyprus (CY) | €2.59 | $2.90 | €3.29 | $3.68 | €4.38 | $4.90 | 75.1% |
| Czech Republic (CZ) | €2.31 | $2.59 | €2.93 | $3.28 | €3.54 | $3.96 | 82.7% |
| Denmark (DK) | €3.22 | $3.61 | €4.34 | $4.86 | €5.57 | $6.23 | 77.9% |
| Estonia (EE) | €2.86 | $3.20 | €3.54 | $3.96 | €4.07 | $4.56 | 86.9% |
| Finland (FI) | €5.40 | $6.05 | €6.89 | $7.72 | €7.71 | $8.63 | 89.5% |
| France (FR) | €5.88 | $6.59 | €7.31 | $8.19 | €8.57 | $9.59 | 85.3% |
| Germany (DE) | €3.27 | $3.66 | €4.23 | $4.74 | €6.03 | $6.75 | 70.2% |
| Greece (GR) | €2.75 | $3.08 | €3.56 | $3.99 | €4.22 | $4.72 | 84.5% |
| Hungary (HU) | €2.11 | $2.37 | €2.94 | $3.29 | €3.87 | $4.33 | 75.9% |
| Ireland (IE) | €8.00 | $8.95 | €10.25 | $11.48 | €12.06 | $13.51 | 85.0% |
| Italy (IT) | €2.93 | $3.28 | €3.81 | $4.27 | €4.90 | $5.49 | 77.8% |
| Latvia (LV) | €2.29 | $2.57 | €2.91 | $3.26 | €3.59 | $4.02 | 81.3% |
| Lithuania (LT) | €2.14 | $2.39 | €2.76 | $3.09 | €3.57 | $4.00 | 77.2% |
| Luxembourg (LU) | €2.55 | $2.86 | €3.23 | $3.61 | €4.66 | $5.22 | 69.3% |
| Malta (MT) | €3.40 | $3.81 | €4.22 | $4.72 | €5.38 | $6.02 | 78.4% |
| Netherlands (NL) | €3.93 | $4.40 | €5.06 | $5.66 | €6.49 | $7.27 | 77.9% |
| Poland (PL) | €2.08 | $2.32 | €2.68 | $3.00 | €3.22 | $3.61 | 83.1% |
| Portugal (PT) | €2.61 | $2.93 | €3.48 | $3.89 | €4.61 | $5.16 | 75.4% |
| Romania (RO) | €2.12 | $2.38 | €2.69 | $3.01 | €3.54 | $3.96 | 76.0% |
| Slovakia (SK) | €2.07 | $2.32 | €2.64 | $2.95 | €3.42 | $3.83 | 77.2% |
| Slovenia (SI) | €2.28 | $2.55 | €2.95 | $3.30 | €3.69 | $4.13 | 79.8% |
| Spain (ES) | €2.81 | $3.15 | €3.60 | $4.03 | €4.55 | $5.09 | 79.2% |
| Sweden (SE) | €3.02 | $3.38 | €4.12 | $4.61 | €5.51 | $6.18 | 74.7% |
| United Kingdom (GB) | €6.83 | $7.64 | €8.54 | $9.56 | €10.26 | $11.49 | 83.2% |
| Average | €3.22 | $3.61 | €4.14 | $4.63 | €5.18 | $5.80 | 79.3% |
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Source: European Commission, “Excise Duty Tables: Part III – Manufactured Tobacco,” https://ec.europa.eu/taxation_customs/sites/taxation/files/resources/documents/taxation/excise_duties/tobacco_products/rates/excise_duties-part_iii_tobacco_en.pdf. Note: The excise duties were converted into USD using the average 2019 USD-EUR exchange rate (0.893); see IRS, “Yearly Average Currency Exchange Rates,” https://www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates. |
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Source: Tax Policy – Cigarette Taxes in Europe
Upstate Tax Professionals