EU: Philip Morris boasts of its economic power, omitting the significantly higher cost of tobacco

On October 15, 2026, Philip Morris International (PMI) published the second edition of its "EU Economic Footprint" report. Commissioned by the firm EY-Parthenon, the report estimates that the group's activities contributed €342.8 billion to the European Union economy between 2021 and 2025. PMI calls for a "predictable" regulatory framework. More than half of this amount represents tax revenue paid by consumers. The report does not include the costs associated with tobacco consumption, which the European Commission's Joint Research Centre (JRC) estimates at €80.7 billion per year for health-related costs alone within the EU. This publication comes as the Commission prepares to revise the directives on tobacco products and advertising, and as thirteen Member States advocate for a regulatory pause in the name of simplification.

The report is based on an input-output model (Leontief model). Using a company's revenue, this model estimates the activity generated by its suppliers (indirect effect) and by the spending of the employees concerned (induced effect). The data used was provided by PMI. EY-Parthenon specifies that the data has been "neither audited nor verified" and that the report does not assess the consequences of tobacco and nicotine consumption for public health.[1].

A figure based primarily on tax revenues and without taking costs into account

The figure of €342.8 billion combines three elements of a different nature: €195.7 billion in tax revenue, €130.5 billion in economic activity, and €16.6 billion in retailer margins. Tax revenue represents 57% of the total. This revenue comes primarily from excise duties and VAT. These taxes are included in the price of products: consumers pay them when they make purchases, while the company is responsible for collecting and remitting them to the government. However, the report presents them as "taxes paid by SMEs" in the title of one of its graphs. This revenue should therefore not be confused with taxes that the company itself owes, such as corporate income tax.[2]. Furthermore, this is therefore not a creation of wealth but a simple tax transfer.

The report also fails to mention the fact that tax policies involving increases, and therefore tobacco excise duties, pursue a public health objective, since they aim to reduce consumption. The European Commission thus attributes approximately 40% of the decline in smoking prevalence in the Union to tax policy.[3]. However, the manufacturer is consistently opposed to tax increases. In a letter sent in March 2026 to the President of the Commission, PMI reiterated the risk of illicit trade linked to any tax increase within the framework of the revision of the Tobacco Tax Directive.[4].

In this study commissioned by Philip Morris, the model used associates approximately two euros of indirect and induced effects with every euro of direct economic activity. It fails to consider that the funds not allocated to tobacco would be spent on other goods and services, which generate significantly more economic activity and employment. It therefore measures a gross contribution, not the company's net contribution to the economy. The report also compares tax revenues to public spending items, such as the Horizon Europe program budget, without comparing them to public spending related to the consumption of these products. Finally, according to the report, products that PMI classifies as "smoke-free" represented 41.5% of its global revenue in 2025. The majority of its revenue thus still comes from cigarettes, and the "smoke-free" category includes heated tobacco products. This approach also implies that these products are not problematic for the community, whereas they also induce pathologies, particularly negative environmental externalities and therefore a significant social cost.

A publication in the context of a review of European regulations

Highlighting its economic weight (jobs, tax revenue, farmers, retailers) is a well-documented strategy of the tobacco industry. The WHO even includes "exaggerating the economic importance of the industry" among the interference tactics used by manufacturers.

The report is being published at a crucial time. The Commission is due to present its proposals for revising the directives on tobacco products and advertising by the end of 2026. The revision of the Tobacco Tax Directive is currently under discussion in the Council, where unanimity is required. In March 2026, PMI had already written to Ursula von der Leyen asking that the EU not "marginalize" a "legal industry." Its report now calls for a regulatory framework that "enables innovation instead of placing unnecessary barriers in its path.".

These demands align with the European debate on simplification. In an informal document published in October 2026, thirteen Member States (Austria, Czech Republic, Denmark, Estonia, Hungary, Italy, Latvia, Lithuania, Poland, Portugal, Slovakia, Slovenia and Germany) called for a "European year of implementation and consolidation".«[5]. They are calling for a review of existing rules before any new obligations are adopted for companies. This document does not specifically target tobacco. However, such a pause could slow down several pieces of legislation currently being drafted, including the revision of the Tobacco Products Directive. Several signatories play a significant role in PMI's business. The company's report highlights its production sites in Italy, Poland, Portugal, Lithuania, and the Czech Republic, as well as Germany, the leading country in terms of tax revenue. Several of these countries also score highly in the 2025 Global Tobacco Industry Interference Index, which assesses how well governments protect themselves from such interference.[6].

Members of the European Parliament are warning against this argument that simplification would in reality become "a pretext for deregulation." The assessment of the Tobacco Products Directive, published by the Commission in April 2026, demonstrates the need for action at the government level. The Commission did not make easing the obligations of industry a focus of its consultation, as this could weaken the protection of public health. It also notes that the cost data submitted by economic operators was scarce and unverifiable.[7].

Health and social costs exceed the amounts advanced.

In a study published in April 2026[8], The JRC estimates the healthcare costs associated with tobacco in the EU at €80.7 billion per year, based on 2023 prices. This amount is divided almost equally between healthcare expenditure (€40.4 billion) and indirect costs (€40.2 billion), which include support provided by relatives and lost productivity. It does not take into account the value of lives lost and thus represents a very conservative and partial estimate of the true cost of tobacco products. However, it exceeds the average annual contribution claimed by PMI, which is approximately €68.6 billion per year (€342.8 billion over five years), more than half of which comes from tax revenue. According to the Commission's report, tobacco caused approximately 530,000 deaths in the Union in 2023. It is estimated to be responsible for approximately 20% of cancers and more than 80% of lung cancer deaths.

Available national data points in the same direction. In Germany, the first country cited by PMI with €34.2 billion in tax revenue over five years, economist Tobias Effertz (University of Hamburg) estimates the cost of smoking at around €97 billion for 2018, including €30.3 billion in healthcare expenses. He projects it will reach around €120 billion in 2026, while the tobacco tax generated €17.4 billion for the federal government in 2025.[9]. In France, the French Monitoring Centre for Drugs and Drug Addiction (OFDT) estimated the social cost of tobacco at €156 billion for 2019; this assessment included the cost of years of life lost. Tobacco taxes generated €13.1 billion that same year, less than tobacco-related healthcare expenditures of approximately €16 billion. PMI, for its part, reports approximately €29 billion in economic value generated in France over five years.

Globally, a study published in Tobacco Control[10] estimated the economic cost of smoking-related illnesses at 1.8 times the global GDP. This research indicates that the costs of smoking for European societies exceed the inflated economic benefits promoted by the industry.

©Generation Without Tobacco

AE

[1] EY-Parthenon for Philip Morris International, Economic Footprint of Philip Morris International Inc. in the European Union 2021-2025, second edition, October 2026.

[2] Made in Europe: PMI's economic footprint puts industrial transformation in focus, EU Reporter, October 15, 2026, accessed October 19, 2026.

[3] European Commission, Impact assessment accompanying the proposal for a revision of the Tobacco Taxation Directive, SWD(2025) 560, July 16, 2025, accessed October 19, 2026.

[4] Philip Morris urges von der Leyen to include tobacco sector in EU competitiveness debate, EU Reporter, June 23, 2026, accessed October 19, 2026.

[5] New push for “simplification” in EU rule making, EU Reporter, October 14, 2026, accessed October 19, 2026.

[6] Global Tobacco Industry Interference Index 2025, Global Center for Good Governance in Tobacco Control (GGTC) and STOP, accessed on October 19, 2026.

[7] European Commission, Evaluation of the Tobacco Products Directive and the Tobacco Advertising Directive, SWD(2026) 111, April 2, 2026, accessed October 19, 2026.

[8] Salari P., Maragkoudakis P.-A., Wollgast J., The health-related costs attributable to tobacco use in the EU, Joint Research Centre (JRC), European Commission, 7 April 2026, accessed on 19 October 2026.

[9] Effertz T., Stellungnahme zur öffentlichen Anhörung des Finanzausschusses zum Tabaksteuermodernisierungsgesetz, Bundestag, October 5, 2026, accessed October 19, 2026.

[10] Goodchild M., Nargis N., Tursan d’Espaignet E., Global economic cost of smoking-attributable diseases, Tobacco Control, 2018, accessed on October 19, 2026.