EU States, Including Estonia, Propose Tighter Cross-Border Tobacco and Alcohol Limits to Combat Illicit Trade

Introduction: A Push for Stricter Controls

A coalition of European Union member states, prominently including Estonia, is pushing for a significant amendment to existing legislation concerning cross-border shopping limits for tobacco and alcohol. The primary objective of this initiative is to combat the escalating problem of illicit trade within the bloc, which poses substantial economic and public health challenges. The proposals seek to introduce new, tighter restrictions on the quantities of these products individuals can import for personal use when travelling between EU countries.

The Legislative Framework and Key Proponents

The discussions revolve around amending Article 32 of the Excise Duty Directive, a key piece of EU legislation that regulates intra-EU imports. The proposal was reportedly tabled by Denmark, the current holder of the EU's Council presidency, during an early December meeting focused on the revision of the Tobacco Taxation Directive (TED). Denmark's initiative suggests a combination of milder tobacco taxation and stricter limits on intra-EU tobacco imports.

Several countries have expressed clear support for reducing the quantities that EU consumers may import. Among them are Estonia, Belgium, the Czech Republic, and Finland. Furthermore, Austria, Finland, Estonia, Hungary, Ireland, Latvia, France, Slovenia, Bulgaria, Malta, and Germany were identified as being open to a review of Article 32. Notably, Estonia, Finland, and Germany have also advocated for extending any amendments to Article 32 to include alcoholic beverages.

Current Limits and the Call for Change

Under current EU guidelines, individuals are permitted to import relatively generous quantities of tobacco and alcohol for personal use without further taxation. These limits include:

• Tobacco products: 800 cigarettes (equivalent to four boxes), 400 cigarillos, 200 cigars, or 1 kilogram of smoking tobacco.
• Alcoholic beverages: 10 litres of spirits, 20 litres of fortified wine, 90 litres of wine (with a maximum of 60 litres of sparkling wine), and 110 litres of beer.

The proposed changes aim to significantly reduce these allowances, thereby making it more difficult for illicit traders to exploit the 'personal use' exemption for commercial purposes.

Addressing the Impact of Illicit Trade

The impetus behind these proposed tighter limits stems from the severe consequences of illicit trade. A 2024 KPMG study revealed that smokers in the EU consumed 38.9 billion illicit cigarettes in 2024, marking a 10.8% increase from the previous year and representing the highest level since 2015. This illicit market accounts for 9.2% of total cigarette consumption and leads to an estimated loss of €14.9 billion in tax revenues for governments in 2024, with overall illicit tobacco trade costing Europe €19.4 billion in lost tax revenues. The illicit trade not only deprives national budgets of critical funds but also undermines public health policies designed to reduce tobacco and alcohol consumption. Experts also highlight its role in fueling organized crime and money laundering.

Countries like France and the Netherlands have seen a significant surge in illicit cigarette consumption, with France alone accounting for 18.7 billion illicit cigarettes in 2024, making it the largest illicit market in Europe. This phenomenon, often referred to as 'cross-border shopping,' allows consumers to bypass highly taxed products in their domestic markets, further exacerbating the issue.

Challenges and Future Outlook

Despite the strong support from several member states, the path to implementing these stricter limits is not without hurdles. The European Commission has reportedly shown hesitation, suggesting that a review of Article 32 should not be part of the TED discussions. Furthermore, any revision of the Tobacco Taxation Directive requires unanimous approval from all member states, indicating that political compromises will be necessary. While some argue that increased taxation can lead to more illicit trade, evidence suggests that weak law enforcement is the primary driver of such activities. The ongoing discussions underscore the complex balance between facilitating free movement within the EU and safeguarding national revenues and public health.