EU plans to raise tobacco taxes to 258%: Cyprus fears surge in smuggling

The European Commission has presented a draft directive for a sharp increase in excise duties on tobacco products across all EU countries, including Cyprus. According to the document, excise duties on rolling tobacco may rise to 258%, on regular cigarettes to 139%, and taxes on e-cigarettes, heated tobacco devices, and nicotine pouches will also increase.

The proposal has raised concerns in Cyprus. Zacharis Manitarras, representative of the Cyprus Employers and Industrialists Federation (KEVE), stated that despite the good intentions of the reform — protecting public health — such a steep rise in excise duties could have the opposite effect. According to him, instead of reducing tobacco consumption, Cyprus risks an increase in illegal trade. Already in 2024, about 14% of cigarettes and over 50% of tobacco products on the island were sold illegally.

Manitarras noted that Cyprus, due to its geographic features and the open “green line” between north and south, is particularly vulnerable to smuggling. He suggested that the government use the so-called flexibility clause provided in the draft directive to implement new rates gradually and mitigate the impact on the domestic market.

According to KEVE, the tax increase will also affect small retail outlets — kiosks and mini-markets, for which tobacco sales are a major source of income. Since 2013, over 600 kiosks have closed in Cyprus, and the new tax measures may accelerate this process.

The business community calls on the Cypriot authorities to take an active role in discussions within the EU Council on Economic and Financial Affairs (ECOFIN) to protect national interests and propose compromise solutions. If the European Commission initiative is approved, member states will need to adapt their tax systems in the coming years.

Experts warn that sharp increases in tobacco and vaping product prices could lead not only to growth in the illegal market but also to a reduction in tax revenue due to declining legal sales.