© AFP
The EU plans to modernise tobacco taxation to help finance a significantly larger budget, as farm subsidies face cuts and member states push back.
The European Commission on Thursday presented its proposed multiannual financial framework (MFF) for 2028 to 2034, worth a record €2 trillion. The aim is to sustain high levels of investment in key areas, like sustainability and defence, without raising direct contributions from member states.
To bridge the gap, the Commission plans to tap into new revenue sources, including a revised EU-wide tobacco tax. The idea is for member states to transfer 15% of their tobacco tax revenues to the EU budget, with rates adjusted according to national purchasing power.
“It’s a budget for a new era”, Commission President Ursula von der Leyen said. “A budget that reflects our ambitions, meets our challenges, and strengthens our independence.”
The proposed budget is €700 billion higher, almost a third more, than the current one, and will now be debated in the Council and the European Parliament over the next two years.
Anne Calteux, the EU Commission’s representative in Luxembourg, explained: “National contributions should remain stable. Naturally, with a larger budget, we need to use our own resources (...)", that’s where the revised tobacco tax comes in.
The plan would impact countries like Luxembourg, where nearly 90% of cigarettes sold are consumed by cross-border shoppers. In 2024, tobacco sales brought the Luxembourgish state around €1.4 billion in tax revenue. A tax hike could reduce price competitiveness and potentially shrink those revenues.
The Commission argues the current minimum tax levels on tobacco are outdated and distort the internal market. Tax rates vary widely across member states, creating loopholes and unfairness, said Calteux. The new system would be more equitable and easier to implement.
The proposal is now on the table, awaiting Council negotiations. Meanwhile, another part of the plan has drawn sharp criticism: the Common Agricultural Policy budget would shrink by 20%, cutting farmers’ support to €300 billion.
Farmers’ associations are calling it a dark day for European agriculture. In Luxembourg, Marc Fisch from the national farmers’ union warned the cut would be disastrous. Food security has only been possible thanks to stable budgets and a common agricultural policy, he said.
The Luxembourg Farmers’ Central is urging politicians to reject the proposal, arguing that Europe’s future food security is at stake.
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