Emerging Trends of Fiscal Prohibition

The debate surrounding paraprohibitive taxation of tobacco products is gaining increasing traction within the European public health discourse. This refers to a tax policy that goes beyond merely influencing consumption patterns and effectively seeks to eliminate them altogether. Through drastic price increases, legal tobacco and nicotine products are intended to become economically unattractive or practically inaccessible. This approach has been notably reinforced by the European Parliament’s 2022 "BECA Resolution" (Report of the Special Committee on Beating Cancer), which aims to achieve a "smoke-free generation by 2040" and recommends making tobacco and nicotine products as unappealing as possible. The strategies outlined in the resolution go beyond behavioural regulation and are explicitly designed to drive these products out of the market structurally. The term paraprohibitive taxation thus refers to a fiscal approach that deliberately crosses the threshold into de facto prohibition - intentionally and with political calculation.

Internal Market, Legal Framework, and the EU’s Treaty Logic

The European Tobacco Wholesalers Association (ETV) views this development with deep concern. Such a tax policy not only contradicts fundamental principles of European economic policy, but also undermines the contractual logic of the Union itself. According to Article 3 of the Treaty on European Union, the EU is expressly mandated to establish a functioning internal market and to promote economic activity. A tax policy that systematically renders certain legal products unaffordable effectively imposes normative hierarchies on consumer behaviour and violates the principle of non-discriminatory access to the market.

From Steering to Suppression: A Shift in Fiscal Legitimacy

Tobacco products are among the most heavily regulated and taxed product groups in nearly all EU Member States. Tobacco taxation has traditionally served a dual purpose: generating public revenue and steering health-related behaviour. This dual objective is both legally recognised and historically rooted. However, when tax policy ceases to guide behaviour and instead aims to eliminate an entire legal market, it moves beyond the realm of economically justified and constitutionally viable measures. This marks the crossing of a critical boundary into covert prohibition - with predictable side effects.

Black Market and Loss of Control: Empirical Warning Signs

Among the most severe consequences of quasi-prohibitive tax policies is the promotion of illicit trade structures. Studies conducted by the OECD, WHO, and European customs authorities clearly demonstrate: excessive price increases for highly demanded consumer goods lead to a significant rise in black market activity.

In France, for instance, several tax hikes have resulted in billions of untaxed or counterfeit cigarettes circulating annually.² In Germany too, the share of tobacco products not taxed domestically already exceeds 20 per cent, with regional peaks reaching as high as 44 per cent.³ Further over-taxation would only accelerate this trend. In doing so, the state would not only forgo valuable tax revenues but also lose control over product safety, youth protection, and legal distribution channels.

Historical Parallels: The Failure of Prohibition

A glance at history highlights the risks of such policy approaches: Prohibition in the United States (1920–1933) did not lead to a reduction in consumption but rather triggered an explosive expansion of the black market and strengthened organised crime. A similar development looms in the field of tobacco and nicotine products if fiscal policy continues to drift towards market exclusion.

Market Structure and SMEs: Livelihoods at Risk

The tobacco wholesale sector, predominantly composed of small and medium-sized enterprises (SMEs), is an integral part of Europe’s regulated goods circulation. These businesses ensure the legal, tax-compliant, and youth-protection-oriented availability of tobacco products - including in peripheral and economically weaker regions. This infrastructure cannot be arbitrarily replaced. Undermining or dismantling it would result in market disruption, job losses, a decline in municipal revenues, and the displacement of legal supply channels in favour of informal, often illegal alternatives.

Between Education and Paternalism: Societal Policy Implications

Taxation of legally consumed products is inherently fraught with normative tensions. In a liberal society, it is the role of the state to promote health-conscious behaviour through education, awareness, and prevention - not to penalise or effectively prohibit individual consumption choices through excessive fiscal measures. A tax policy that renders legal value chains structurally unviable not only infringes upon economic freedoms but, in effect, may equate to a de facto ban on professional activity. European primary law sets clear boundaries in this regard.

Fiscal Sustainability Instead of Tax Risks

Paraprohibitive taxation is not only questionable from a public health perspective, but also fiscally counterproductive. Consumption taxes, such as tobacco excise, have historically served as reliable sources of government revenue. A decline in legal sales volumes caused by excessive taxation would jeopardise this function. The foreseeable consequences would be growing tax losses, a loss of regulatory control, and an expanding black market. Thus, a supposedly health-driven tax strategy would ultimately backfire from a fiscal standpoint.

Risk Differentiation Instead of Blanket Measures

Treating all tobacco and nicotine products the same is untenable from a regulatory perspective. Different product categories—such as traditional cigarettes, heated tobacco products, e-cigarettes, or oral nicotine products—carry varying levels of risk. A tax policy grounded in evidence must reflect these differences. Countries like Sweden demonstrate that differentiated tax regimes can support public health objectives while remaining compatible with market realities. In contrast, blanket taxation is neither appropriate nor effective.

Youth Protection and Oversight: The Value of Legal Distribution

A functioning legal market is essential for protecting young people. Only where products are sold through trained retailers, subject to age verification systems and regulated distribution channels, can legitimate protective goals be meaningfully enforced. Over-taxation that destroys these structures simultaneously undermines the ability to regulate.

Conclusion: Towards a Responsible and Proportionate Tax Policy

The European Tobacco Wholesalers Association (ETV) firmly opposes the introduction of paraprohibitive taxation on tobacco and nicotine products. Such measures erode the legitimacy of fiscal governance, destabilise regulated market structures, promote illicit parallel economies, and violate the principles of evidence-based and proportionate regulation. The ETV advocates for a nuanced, risk-based tax approach that balances public health goals with economic pragmatism, legal certainty, and social responsibility.

1 European Parliament: Resolution„Strengthening Europe in the fight against cancer - towards a comprehensive and coordinated strategy“ (A9-0001/2022), adopted on 16 February 2022.

² See https://www.pmi.com/media-center/press-releases/press-details/?newsId=28981: Estimates suggest that more than 18.7 billion illicit cigarettes are currently in circulation.

³ See also: https://www.zigarettenverband.de/wp-content/uploads/D_Karte-1Q-2025.pdf