Tobacco: Berlin relies on taxation to finance health insurance

While officials from the German CDU/CSU and SPD coalition are advocating for higher tobacco taxes to fund healthcare, the debate highlights the devastating impact of smoking, responsible for approximately 131,000 deaths annually and over €100 billion in costs to society. The measure could raise the price of a pack to €11, while the need for strong and harmonized taxation across the European Union is being emphasized. This announcement comes amidst the revision of the European Directive on the taxation of tobacco products, the initial proposal from the Commission having been weakened in the Council under the Cypriot presidency.[1].

A tax increase is being considered to finance healthcare and reduce consumption.

Members of parliament from the German governing coalition of the CDU/CSU and the SPD have proposed a significant increase in taxes on cigarettes and other tobacco products, presented both as a budgetary lever and as a tool for public health prevention. According to data presented during the parliamentary debate, smoking causes approximately 131,000 deaths annually in Germany and generates over €30 billion in direct costs for the healthcare system, in addition to nearly €70 billion in indirect economic costs related to lost productivity, sick leave, and chronic illnesses. In this context, the additional revenue from an increase in excise duties could contribute to sustainably supporting the financing of health insurance, which is heavily burdened by tobacco-related healthcare expenditures. The CSU's health officer, Hans Theiss, proposes using these new resources to finance a reduction in VAT on medicines, which would go from 19 % to 7 %, in order to reduce the out-of-pocket expenses for patients while compensating for the deficits of health funds.

In concrete terms, the scenario mentioned would lead to a significant increase in the average price of a pack of cigarettes, which could rise from around €9 to nearly €11.[2]. This tax increase also aligns with international public health recommendations, which state that price increases are the most effective measure for reducing smoking prevalence. Economic data shows that higher taxes decrease the affordability of tobacco products, discourage young people from starting to smoke, and encourage existing smokers to quit. Thus, the German proposal explicitly combines a fiscal consolidation objective with a preventative one, using taxation as a structural tool to reduce consumption and, consequently, lower tobacco-related costs for healthcare.

Germany faces a persistent lag in tobacco control policies

Germany is consistently identified as one of the least advanced EU member states in the fight against smoking, with relatively low levels of taxation, limited price increases, and insufficiently protective regulations. This situation maintains high affordability of tobacco products and contributes to slowing the decline in smoking prevalence.

Furthermore, the country consistently ranks among the lowest in terms of protecting public policies from tobacco industry interference, in accordance with Article 5.3 of the WHO Framework Convention on Tobacco Control, which the country has ratified. Analyses highlight insufficient transparency in interactions with tobacco industry representatives and significant tobacco lobby access to decision-making processes, resulting in regulatory compromises and trade-offs that are less favorable to public health protection.

A substantial and sustained increase in excise duties, combined with better protection of public policies against the influence strategies of the tobacco industry, is a key lever for aligning Germany with European and international best practices to achieve a lasting reduction in smoking.

The challenge of European harmonization of tobacco taxation

Beyond the national debate, the issue of tobacco taxation is part of a crucial European framework for the effectiveness of public health policies. The European Commission has presented a proposal to revise the Tobacco Products Tax Directive, which had not been substantially updated since 2011. While the initial version reflected a strong public health objective, the compromises discussed under the current Presidency of the Council, held by Cyprus, have led to a significant weakening of the text, with lower thresholds and increased flexibility granted to Member States, particularly regarding the timeframes for bringing taxation levels up to date.

However, strong, consistent, and harmonized taxation across the European Union remains a key lever for sustainably reducing consumption, which remains particularly high in this region of the world. Significant price differences between countries can encourage cross-border purchases fueled by the oversupply of these markets by tobacco manufacturers. Tax disparities can thus at least partially mitigate the impact of national price increases. Strengthening European minimums therefore appears to be a necessary condition for improving the functioning of the internal market and guaranteeing the protection of Europeans in accordance with the provisions of the Treaty.

©Generation Without Tobacco

AE

[1] Koalitionspolitiker schlagen weitere Erhöhung der Tabaksteuer vor, Die Zeit, published on January 30, 2026, accessed on February 4, 2026

[2] Zigaretten bald teurer? Politiker für höhere Tabaksteue, ZDF, published on January 30, 2026, accessed on February 4, 2026