To finance its next budget, the European Union would tax tobacco and electronic waste

The European Commission wants all member states to agree on new sources of funding for the EU budget. Proposals include taxes on tobacco, large corporations, electronic waste, and carbon emissions, according to a draft seen by EURACTIV.[1].

Towards new resources to finance the EU budget

The next multiannual financial framework (MFF), covering the period 2028–2034, aims to support competitiveness and defense. However, national contributions based on gross national income (GNI), which financed 56 % of the previous budget, " will reach their limits ", the Commission estimates in its project.

The document proposes five new own resources at the European level. Among them, a tobacco tax (TEDOR) that would generate significant revenue while supporting the EU's public health objectives. Although the text does not detail the proposed rates, EURACTIV previously mentioned a possible increase of 139 % in excise duties on cigarettes.

A "Corporate Own Resource" (CORE) would target companies established in the EU with an annual net turnover exceeding €50 million. Other sources would be linked to the ecological transition, notably through contributions on electronic waste, as well as two carbon mechanisms: the emissions trading (ETS1) and the carbon border adjustment mechanism (CBAM), already under discussion, and targeting domestic and imported emissions.

Up to €14 billion could thus be generated to finance the "ReArm Europe" defense program and the European Defense Fund. Supported by 15 member states, including France and the Netherlands, the project aims to harmonize tobacco prices across the EU. This would lead to a sharp rise in prices in southern and eastern countries, such as Greece, Italy, and Romania, where cigarettes are currently cheaper.[2].

But the initiative goes beyond public health: Brussels wants tax revenues, currently collected by states, to be paid directly into the European budget, marking a major change in the structure of EU resources.

A crucial vote is scheduled for 16 July 2025, at a meeting of the College of Commissioners devoted to the future multiannual budgetary framework.

According to an internal document, the increases could reach from +94 % to +139 % on cigarettes, +24 % to +258 % on rolling tobacco, +300 % to +1,090 % on cigars and cigarillos and +41 % on average on all tobacco and nicotine products, also concerning e-liquids and nicotine pouches.[3].

An ambitious budget in the face of political and financial constraints

The Commission is calling for a more flexible European budget adapted to current challenges, but budgetary decisions require unanimity among member states. To facilitate agreement, the majority of revenues from the ETS system would be returned to national budgets, and a temporary solidarity adjustment mechanism would offset imbalances between countries that benefit from and lose out on the new system.

Despite similar proposals in 2020 and 2023, little progress has been made within the Council. However, the negotiation of the next budget represents a strategic opportunity to move forward.

From 2028, Member States will also have to start repaying loans taken out under the €650 billion post-COVID recovery plan (Recovery and Resilience Facility). These repayments will require around one-fifth of the EU's current annual budget, or between €25 billion and €30 billion per year.

As one European diplomat pointed out to EURACTIV, it is very difficult to agree on new resources without simultaneously addressing the issue of spending. The challenge is therefore twofold: ensuring the EU's financial sustainability while meeting high expectations for strategic investment.

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[1]Wax Eddy, Wulff Wold Jacob, EU to tax tobacco, large companies to fund next budget, Euractiv, published July 12, 2025, accessed July 15, 2025

[2]Protothema, EU eyes €14 billion from tobacco tax hike to fund defense push, published July 14, 2025, accessed July 15, 2025

[3]Garoscio Paolo, Tobacco: Brussels wants to increase taxes and keep the money, Morning Economy, published July 11, 2025, consulted July 15, 2025

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