Dispute over nicotine pouches: Sweden delays agreement on higher EU minimum taxes.

The EU wants to increase taxes on cigarettes and introduce common minimum taxes on e-cigarettes and nicotine pouches for the first time. However, Sweden in particular opposes the plans. The main point of contention is the proposed tax rate for nicotine pouches. As tax decisions in the Council require unanimity, Sweden could prevent an agreement. It therefore remains uncertain whether EU finance ministers will be able to agree on a reform on 9 November.

Commission proposes significantly higher minimum taxes

With its proposal for a directive presented in July 2025, the European Commission aims to substantially increase the minimum tax rates on cigarettes, which have remained unchanged since 2010. Common minimum tax requirements would also be introduced for e-cigarettes, heated tobacco products and nicotine pouches for the first time.

The Commission is pursuing several objectives. First, it wants to reduce differences in taxation between Member States. Significant price differences can encourage consumers to buy tobacco products in countries with lower taxes or lead to increased cross-border smuggling.

Second, higher taxes are intended to reduce tobacco consumption and thereby protect public health. According to Commission estimates, tobacco taxes have accounted for around 40 per cent of the decline in smoking over the past decade.

In addition, the Commission wants to use tobacco taxation to help finance the EU budget. Under the proposal, 15 per cent of the revenue generated from EU minimum tax rates would flow to the EU as a new own resource. This could generate around 11.2 billion euros annually.

Why Sweden is blocking progress

The proposed taxation of nicotine pouches is particularly controversial. These products contain nicotine but no tobacco and are widely used in Sweden. While the Commission proposes a minimum tax of 50 per cent of the retail price or 143 euros per kilogram, Sweden currently levies a tax of around 19 euros per kilogram.

The Swedish government opposes the proposed increase, arguing that nicotine pouches are a less harmful alternative to cigarettes. It points to the country's low smoking rate of around 5 per cent. However, it remains disputed whether this is actually due to the use of nicotine pouches and traditional Swedish snus, or rather to other tobacco control measures and restrictions on advertising and availability.

Economic interests may also play a role. Sweden is home to Swedish Match, a major manufacturer of nicotine pouches that has been part of the tobacco group Philip Morris since 2022.

Member States have differing interests

Other Member States are also critical of the proposed minimum taxes. Italy fears an increase in illicit trade, while Hungary wants to protect the interests of its tobacco industry.

Other countries, by contrast, are calling for stricter rules. In early October, eight Member States, including France, the Netherlands and Spain, sent a joint letter to the Commission calling for an EU-wide ban on flavours, a ban on the sale of novel nicotine products and stricter advertising rules. These demands go beyond the planned revision of tobacco taxation and could play a role in the revision of the Tobacco Products Directive announced for this year.

Agreement in November?

The next opportunity to reach an agreement will be the meeting of EU economic and finance ministers on 9 November. The Cypriot Presidency of the Council recently proposed a compromise under which the minimum tax on nicotine pouches would be set at 30 euros per kilogram from 2028 and gradually increase to 80 euros by 2032. However, Member States were unable to agree on the proposal at their last meeting in June.

Health impact is key for social security institutions

For social security institutions, effective tobacco regulation is particularly important from a public health perspective. Lower tobacco consumption means fewer illnesses and therefore a reduced burden on health and pension insurance systems. In Germany, tobacco consumption causes around 30 billion euros in direct healthcare costs each year and increases the risk of receiving a reduced earning capacity pension by 29 per cent.

By contrast, the impact of the proposed EU minimum tax rates on Germany is likely to be limited, as the tax rates planned in Germany already exceed the EU minimum rates under discussion.

From a social security perspective, the planned revision of the European tobacco products and advertising directives is therefore all the more important. In its position paper of June 2026, the DSV already called for a ban on flavours, the inclusion of new tobacco and nicotine products, and strict regulation of advertising.