By Jack Berry
Across the EU, governmental bodies and European Union institutions are increasingly implementing taxes and regulations to influence individual behaviour. Excise policy has emerged as a prominent aspect of the ongoing discourse surrounding public health, governmental intervention, and fiscal challenges within Europe.
The use of levies on tobacco, alcohol, and sugar-sweetened products has become a major instrument within the EU’s public health policy framework. Although taxation remains primarily a national competence, Brussels seeks to encourage Member States to adopt fiscal measures that reduce the prevalence of non-communicable diseases (NCDs), lower healthcare expenditure, and promote healthier consumer behaviour.
The public health rationale for excise taxation
Industries producing tobacco, alcohol, and food high in sugar or salt—collectively referred to as “sin industries” in the policy literature—are increasing their engagement with EU policymakers as the European Commission develops a new framework for fiscal and public health interventions.
The so called “sin taxes,” are grounded in the economic principle of internalising negative externalities by incorporating the social costs of harmful consumption into the market price of products.
The public health rationale for excise taxation is supported by a substantial body of economic and epidemiological research. Price elasticity studies consistently demonstrate that increasing the retail price of tobacco and alcohol products reduces overall consumption, particularly among adolescents, young adults, and lower-income populations, who are generally more responsive to price changes.
In a comparable manner, the implementation of taxes on sugar-sweetened beverages has been linked to significant decreases in the purchase of high-sugar products and has motivated manufacturers to reformulate their products to lower sugar content.
Consequently, fiscal policies are increasingly viewed as cost-effective interventions for preventing obesity, type 2 diabetes, cardiovascular diseases, cancer, and other chronic conditions that impose significant burdens on European healthcare systems.
However, excise taxation serves multiple objectives beyond influencing consumer behaviour. It generates substantial public revenues that may support healthcare financing, disease prevention programmes, and broader public health initiatives. Furthermore, it contributes significantly to state revenue, thereby enhancing the capacity for public-sector investment and fiscal sustainability.
Social and economic consequences
These fiscal measures remain the subject of considerable economic and political debate. Industries operating within the tobacco, alcohol, food, and beverage sectors argue that higher excise duties may reduce domestic demand, discourage investment, and weaken international competitiveness.
The economic consequences may extend throughout the value chain, affecting growers, manufacturers, distributors, retailers, hospitality businesses, and related service sectors. Regions with significant employment in tobacco cultivation, brewing, distilling, or sugar production may experience disproportionate economic adjustment costs, particularly where alternative employment opportunities are limited.
Industry associations advocate for evidence-based policymaking, asserting that comprehensive impact assessments must precede the implementation of broad-based taxation schemes. These stakeholders argue for a multi-dimensional policy approach, wherein fiscal instruments are integrated with complementary interventions, including public health education campaigns and product reformulation initiatives, rather than deployed as standalone mechanisms.
Taxes, taxes and more taxes
There is broad evidence that higher taxes on tobacco, and to a lesser extent alcohol and sugar-sweetened beverages, can reduce consumption and improve public health outcomes. However, it would be an overstatement to claim that public health is the only motivation behind these taxes.
Excise taxes provide stable and predictable government revenues. While governments often state that these revenues support healthcare or prevention programmes, in many countries they are not legally earmarked for health spending and instead flow into the general budget. They may therefore finance a wide range of public expenditures, including education, infrastructure, pensions, defence, or debt reduction.
For example, the TEDOR tax proposal by the European Commission aims to enhance tobacco taxation through the introduction of the Tobacco Excise Duty Own Resource (TEDOR). This proposal seeks to generate approximately €11.2 billion annually by collecting a 15% tax on tobacco and related products released for consumption across the EU.
The TEDOR is an additional tax measure that is intended to complement the revision of the Tobacco Taxation Directive (TED). While the TED aims to increase minimum tax rates and expand its scope to new products such as e-cigarettes and nicotine pouches, TEDOR would impose further taxes beyond those already proposed in TED.
The TEDOR proposal reminds us of other absurd and unfair excise taxes in history, such as the Salt Tax in British India at the beginning of the 20th century. The British government heavily taxed salt, an essential necessity for everyone. Poor people spent a significant share of their income on salt because they had little choice. The tax became a symbol of colonial oppression. In 1930, Mahatma Gandhi led the famous Salt March to protest it.
Nowadays, imposing a uniform excise tax across economically heterogeneous states may impose disproportionate fiscal pressure on some of those, thereby indirectly limiting national tax autonomy. In addition, price increases could fuel illicit trade in tobacco products, as is the case in France (38 per cent of the market share) and in the Netherlands, where a similar rise has occurred.
Freedom of choice
Despite clear evidence of differing health risks, some jurisdictions are pressing forward with a surprising strategy: applying a single tax rate to every nicotine-containing product. By treating cigarettes, e-cigarettes, heated tobacco, and nicotine pouches as if they are all the same, policymakers overlook the substantial scientific distinctions between combustible and non-combustible nicotine products.
In a democracy, adults should retain the freedom to make informed choices about legal products, provided they understand the associated health risks. Higher taxation may disproportionately affect lower-income households and legitimate industries, while encouraging illicit trade or cross-border purchasing if tax differentials become too large.
The EU counts among its Member States countries – like Belgium, the Netherlands and France – with a very high overall tax burden. Excise duties on tobacco, alcohol, but also fuels have increased substantially in recent years.
This means businesses in these sectors face cumulative pressures from excise duties, VAT, labour costs, environmental regulation, and corporate taxation. For firms operating with low profit margins, particularly retailers, cafés, restaurants, wholesalers, and SMEs, the combined regulatory burden has negative consequences on profitability and investment.
A divided Union
National governments are far from united on taxation. Some, particularly in Northern and Western Europe, favour tougher action on tobacco and alcohol. Others are more hesitant, stressing economic competitiveness and the risk of political backlash from consumers and industry.
Numerous personal choices have the potential to inflict harm not only on the individual but also on others within society. Accordingly, the primary function of the state should be to mitigate these externalities, consistent with the principle that individual liberty is limited when it infringes upon the rights of others.
EU-supported excise taxation represents a policy instrument that seeks to reconcile public health objectives with economic considerations. While the evidence suggests that appropriately designed and proportionate fiscal measures can contribute to significant improvements in population health and reduce the societal costs associated with preventable diseases, their implementation requires careful consideration of industrial competitiveness, employment, equity, and market integrity.
The state’s attempt to prevent people from harming themselves is highly controversial. Governments and EU Institutions often justify such interventions by arguing that unhealthy behaviour imposes costs on others – for example, through publicly funded healthcare systems.
At this juncture, imposing taxes on products such as alcohol, tobacco, and food high in sugar becomes relevant. However, this development raises essential questions about the optimal design of such tax policies.
Furthermore, it prompts critical examination of the perception that citizens and businesses are increasingly subject to exploitative fiscal measures by paternalistic tax collection systems within the institutional structures and governments of the European Union.
*Jack Berry is a pen name. The author is known to the editors.
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