(de-news.net) – A four-year tobacco tax increase starting in 2027 has been authorized by the German Bundestag. The goal is to increase government revenue and decreasing smoking. The Finance Ministry anticipates 11.6 billion euros in new revenue. Legislators, business groups, and taxpayer advocates, however, doubt that the income targets can be reached and caution that higher costs may push customers into illegal marketplaces. The Ministry predicts a drop in cigarette sales, while health organizations welcome the increases as a way to reduce tobacco consumption and prevent disease.

Germany’s Bundestag has approved a phased increase in tobacco taxes from 2027 through 2030, seeking to strengthen public finances while discouraging smoking. Under the legislation, taxes will also rise on rolling tobacco, pipe tobacco, heated tobacco, waterpipe tobacco and e-cigarette liquids. The price of a pack of 20 cigarettes could reach approximately 11.36 euros by 2030, compared with the current price of 8.77 euros. The Federal Ministry of Finance expects the tax increases to generate an additional 1.5 billion euros in revenue in 2027, with cumulative additional receipts projected to reach 11.6 billion euros over four years. By 2030, total tobacco tax revenue is forecast to amount to 21.3 billion euros.

Revenue forecasts face scrutiny

The government’s projections have prompted doubts among lawmakers from both governing and opposition parties, as well as industry representatives and taxpayer advocates. The CDU/CSU parliamentary bloc has questioned whether the anticipated revenue gains will materialize, pointing to possible changes in consumer behavior, including a shift toward cheaper products, purchases abroad and illicit tobacco sales. Although estimates included in a joint CDU/CSU–SPD amendment envisage approximately 4.5 billion euros in additional annual revenue by 2030, the Finance Ministry has not publicly explained the calculations underlying its forecasts.

Reiner Holznagel, president of the Taxpayers Federation of Germany, warned that higher prices could push more smokers toward illegally sold cigarettes, reducing the expected fiscal benefits of the policy. Thomas Liebel, head of the Customs and Finance Trade Union, raised similar concerns, cautioning that the government could face a double financial burden: lower-than-expected tax receipts alongside increased expenditures on efforts to combat smuggling.

Tobacco industry questions impact on smoking

Representatives of the tobacco industry have also challenged the expected effects of the tax increases. Jan Mücke, chief executive of the German Federal Association of the Tobacco Industry, argued that previous tax hikes had not established a consistent link between higher prices and reduced smoking. The association instead fears that consumers will increasingly turn to illegal markets, potentially weakening the policy’s public health and fiscal objectives.

Mücke also criticized further price increases amid rising everyday expenses and the electoral gains of the Alternative for Germany, a right-wing political party known as the AfD. His concerns reflect the broader dispute over whether higher tobacco prices will meaningfully reduce consumption or primarily change where consumers purchase tobacco products.

Health organizations back higher prices

Health organizations, by contrast, regard tobacco taxation as an important preventive measure. Reinhardt, president of the German Medical Association, has identified higher tobacco taxes as a significant instrument for protecting public health. The German Federal Association of Pulmonologists has likewise argued that the increases could contribute to long-term cancer prevention.

Smoking remains a major preventable cause of illness and premature death, while the associated health consequences impose substantial annual costs on Germany’s health care system. From the perspective of public health advocates, higher prices offer a means of discouraging consumption while potentially reducing the longer-term burden of tobacco-related disease.

Ministry estimates a decline in cigarette sales

The Finance Ministry estimates that the tax increases could reduce the volume of cigarettes sold in Germany by approximately 25 percent, although the projection is subject to uncertainty. Official figures from 2025 provide a baseline for assessing the potential scale of that decline: Germany taxed 66.4 billion cigarettes that year.

A reduction of 25 percent would amount to 16.6 billion fewer cigarettes, bringing the annual volume of taxed cigarettes below 50 billion. The estimate illustrates the potential scale of the behavioral change anticipated by the government, but it does not resolve questions about how much of the decline would result from reduced smoking, purchases outside Germany or transactions in the illicit market.

Fiscal and public health goals

The legislation reflects two objectives that may not necessarily produce the same outcome: generating additional government revenue and reducing consumption of tobacco and nicotine products. Health advocates have generally favored stronger tax increases as a means of discouraging smoking, while fiscal policymakers have focused on the contribution higher taxes could make to budget consolidation.

The central uncertainty is whether the government can achieve both aims simultaneously. If consumers reduce their tobacco use as anticipated, the measure could advance its public health objectives. However, if higher prices encourage substantial substitution toward untaxed or illegally sold products, the resulting revenue could fall short of official projections. The policy’s ultimate fiscal and health effects will depend in part on how consumers respond to the phased increases through 2030.

In theory, Germany’s upper house of parliament could stop the new legislation. However, the Bundesrat has raised no objections to the Government’s tax increase, according to media reports.