While the EU’s proposed Tobacco Tax Directive aims to align minimum rates across member states, experts say the harmonization would present a delicate fiscal balance for Luxembourg, where tobacco tourism funds a significant part of the budget. Cigarette prices in Luxembourg could jump from €5.10 to around €8.30, erasing its advantage over neighboring countries, costing the Grand Duchy close to €1 billion, as 95% of the country’s tobacco tax revenue comes from non-residents. At €50 million, tobacco taxes would drop from 69% to 3.5% of Luxembourg’s national budget.
Public health officials argue the tax losses would be offset by saved healthcare costs and reduced productivity losses.