Coalition politicians in Germany are calling for a two-euro increase in tobacco tax per pack to reduce consumption and generate billions in revenue. The extra funds would be used to lower VAT on medicines. Compared to countries like the UK and Australia, Germany has been lenient with the cigarette industry so far.
It has only been a month since cigarettes became more expensive in Germany. Smokers are reacting as in previous years: with a sigh and continued purchases, or trips to neighboring countries like Poland and Czechia. However, drastic tax hikes in the UK and Australia have significantly reduced the number of smokers.
Federal Drug Commissioner Hendrik Streeck (CDU) and other coalition politicians are now demanding two euros more per pack. The revenues should lower VAT on medicines. This marks a departure from the policy that burdens smokers but spares the industry. Internationally, Germany remains lenient, unlike in Ireland or France.
CSU health politician Hans Theiss estimates up to seven billion euros in additional revenue. Federal Finance Minister Lars Klingbeil (SPD) cannot count on this: If consumption drops, revenues fall short; if it persists, it won't cover the costs. Streeck cites 30 billion euros in direct health costs, nearly 70 billion in economic consequences, and 131,000 annual deaths from tobacco.
Consumption is declining slightly, giving the industry time to shift to e-cigarettes. The coalition plans gradual increases from 2027, while the EU mandates higher minimum taxes from 2028. The time for a painful price hike is ripe.
