EU member states have come the closest they have yet to passing the EU’s long-awaited tobacco tax deal, after 26 of 27 member states expressed their support for a heavily revised version of the Tobacco Tax Directive (TTD) at a meeting of EU finance ministers (ECOFIN) yesterday.
The TTD, which was last revised in 2010, sets minimum rates of taxation for tobacco and nicotine products across the EU and, as a tax-related matter, requires unanimous member state approval to pass.
Notably, this version of the TTD agrees in principle to the taxation of nicotine pouches, which would bring these products into an EU-wide taxation framework for the first time.
However, a final deal was thwarted by Malta, which remained a lone holdout against the text despite several rounds of last-ditch negotiations and concessions – prompting significant frustration within the European Commission.
Tax Commissioner Wopke Hoekstra was particularly exasperated over the failure to reach a resolution:
“I have to confess, we do need to make sure that we get this over with. It is complex to continue to [drag] this along,”
Hoekstra told ministers.
“Frankly speaking, I see almost no room to move in dots and commas.”
“If you’re an optimist you might say well, you moved it up to 26 [member states agreeing],”
he added,
“but I would like to ask everyone’s help to make sure we get an agreement and finalise this in the coming weeks under the Irish Presidency.”
Malta’s objections centred mainly on the proposed minimum excise rates, “which remain well above current national levels, notwithstanding the latest changes related to nicotine pouches,” according to Finance Minister Clyde Caruana.
“Such increases risk having disproportionate effects in Malta.”
Even so, the spirit of concession and compromise was clearly the theme of the day, marked by Irish Finance Minister Simon Harris’ repeated exhortations to
“not let the perfect be the enemy of the good.”
To that end, numerous member states made significant concessions to arrive to an agreement on the day, including some of the draft’s fiercest critics. Spain and Sweden were surprise backers, after having publicly signalling their opposition over fine cut tobacco and nicotine pouches respectively, while Finland also came round after initially blocking over insufficiently high minimum excise rates.
Notably, Estonia also acceded to the revised TTD text, after initially rejecting it on similar grounds to Malta – raising questions over Malta’s continued inflexibility.
One EU diplomat referred to Malta as the ‘bad guy’, amid speculation that the Maltese government is holding out on the TTD as a tactic to gain concessions on other EU files.
Malta’s desire to prevent a resolution is further suggested by reports that Maltese Prime Minister Robert Abela reportedly personally intervened to explain Malta’s objection to Irish Prime Minister Michael Martin directly.
Nonetheless, Monday’s meeting marked significant progress on the TTD file, with Harris labelling the meeting “a tremendous achievement.”
Attention will now turn to December, when ECOFIN will convene again for one final push to reach an agreement before the Irish Presidency finishes at the end of 2026.
Malta will be under significant pressure to make this a reality.
