The excise duty increases on tobacco proposed by the European Commission will reduce the differences in tobacco prices between Member States. This will put an end to the disproportionate revenue that Luxembourg derives from tobacco sales without having to pay for the related healthcare costs.

By the web editors 

“Brussels tobacco plans could cost Luxembourg a lot of money,” headlines Luxemburger Wort. The medium could just be right about that if the plans of the European Commission (EC) go ahead. Last week, the Commission presented its plans for the revision of the Tobacco Excise Directive (TED).

The proposal should lead to a reduction in excise duty differences between European member states, and to make tobacco and alternative tobacco products more expensive in most countries. This discourages smoking, but also prevents smokers from looking across borders for their smoking products because they are cheaper there.

One of the countries that still benefits most from that border traffic is Luxembourg. According to figures from Luxembourg customs, 4.9 billion cigarettes were sold in the Grand Duchy in 2024, compared to 4.4 billion in 2023 (and 3.3 in 2020), reports Virgule.

This suggests an important increase in cigarette sales, while according to figures from 2024 there are no more than 123,000 smokers aged 16 and over in Luxembourg. That is about 19 percent of the population. Of the smokers, 15 percent smoke daily and 8 percent occasionally.

Price differences are still significant

Those 123,000 smokers don’t buy those billions of cigarettes. Only 5 percent of tobacco sales in Luxembourg are for local consumption. A pack of cigarettes costs an average of 8 euros (the cheapest brands start around 5.50 euros), while across the border in France it is 13.50 euros. Cigarettes are also more expensive in Germany, Belgium and the Netherlands. A carton of cigarettes costs about 70 euros in Luxembourg, in the Netherlands it is 130 euros.

The Dutch, whether or not in transit, will not deny such an advantage. The National Institute for Public Health and the Environment recently estimated that Dutch smokers buy 60 percent of their smoking products abroad (apart from Luxembourg, also a lot in Germany). The Dutch Food and Consumer Product Safety Authority came up with 45 percent in another study. Many media have now reported on ‘tobacco tourism’, and in a recent report the newspaper NRC also outlines the situation in Luxembourg, where people are queuing up to buy their wares.

The benefits, not the burdens

All those sales to foreigners are doing the 670,000 Luxembourgers no harm. In 2024, the country collected 1.4 billion euros in tobacco taxes. This year, after a slight increase in excise duty, it will already be 1.6 billion and it is expected that this amount will rise to 1.9 billion euros in 2028. This year, that amounts to almost 2,500 euros per resident. By comparison, in the Netherlands the more than 3 billion euros in revenue from tobacco taxes yields less than 200 euros per inhabitant.

In addition, Luxembourg itself does not have to bear the healthcare costs of all those foreign smokers when they become ill thanks to their addiction. Deliberately excise duties kept low therefore contribute greatly to the prosperity of the Grand Duchy. Excise revenues make up 5 percent of the country’s total revenue (28.4 billion euros in 2024). No wonder Finance Minister Gilles Roth was able to present a budget surplus of 317 million euros for 2024 in January.

Excise duty increase of 139 percent

No wonder either that the European Union wants to tackle these kinds of differences in tobacco prices, primarily to reduce tobacco consumption throughout the Union. In the European Commission’s proposal, the minimum rate of excise duty on cigarettes in the EU will increase by 139 percent, from 90 to 215 euros per 1,000 cigarettes and for roll-your-own tobacco by 258 percent, from 60 to 215 euros per kilo. The EC also wants excise duty to be levied on e-cigarettes and heated tobacco products. For cigars, an increase from 12 euros to 143 euros per kilo would apply, which amounts to an increase of 1,092 percent. For e-liquids with more than 15 milligrams of nicotine per ml, a rate of 0.36 euros per ml would apply and for e-liquid with a lower concentration of nicotine 0.12 euros. E-cigarettes may not contain more than 20 mg/ml of nicotine in the EU.

Part of the EC’s plan is that the excise duty increase should be linked to the purchasing power in a country. In countries with low wages, the price of tobacco will then rise less rapidly than in richer countries. And because Luxembourg is one of the most prosperous countries, the excise duty there could make a pack of cigarettes 3.50 euros more expensive, according to Luxemburger Wort. This will affect sales. And possibly also cigarette production, which also takes place in Luxembourg.

Manufacturer opposes increase in excise duty

Cigarette manufacturer Heintz van Landewyck, a Luxembourg family business, therefore also told the Luxemburger Wort: “Taxes are a national matter, and they should remain so.” It is easier to exert influence at the national level than at the European level.

The same manufacturer (with a factory in Fridhaff) gives Virgule insight into the production: “This year we will produce just over 8.3 billion cigarettes in Fridhaff, destined for more than twenty countries, mainly in Europe and beyond.” The manufacturer calculates: “About one in ten cigarettes sold in the Grand Duchy is produced by us.”

Landewyck has also been producing nicotine pouches for a few years now. “The volumes will approach the mark of one million boxes this year, destined for about fifteen European countries, including Luxembourg,” the manufacturer says to Virgule.

The EC also proposes an excise duty on nicotine pouches of 25 percent of the retail price, including taxes and a minimum of 71.5 euros per kilo. Incidentally, Luxembourg is preparing legislation that regulates alternative tobacco products such as nicotine pouches and heated tobacco to combat their use.

The Netherlands benefits from harmonisation

The proposed minimum excise duty rates will increase the prices of tobacco and related products in the countries surrounding the Netherlands, bringing them closer to Dutch prices, which already meet the proposed standards. Luxembourg will be affected, if all goes well, because tobacco tourism will become less attractive to smokers from neighbouring countries. However, that country can take a beating financially, as it turns out.

For the Netherlands, one of the countries that urged the European Commission in March for a rapid revision of the TED, the proposals are good news. More money will flow into the state treasury and at the same time the high prices will serve public health, because for many smokers the fun will be gone. More people will make a quit attempt. But above all, high tobacco prices are intended to make it less attractive for children and young people to experiment with tobacco products.