The German cabinet adopted the draft Tobacco Duty Modernisation Act on 10 August 2021 and was promulgated on 17 August 2021. With this legislation, the German Government is adapting tobacco duty to changes in the tobacco market and in consumer behaviour. Cigarette substitutes such as e-cigarettes (which were previously untaxed) and heated tobacco products (which were insufficiently taxed) will now be taxed appropriately. Another objective is to gradually adjust tobacco duty rates, as was also done in the past. The new law aims also to improve public health and protect minors, setting a necessary entry-level threshold for the pricing of tobacco and substitute-products that are harmful to health.
Tobacco duty on a packet of cigarettes (20 units) will be subject to regular, moderate increases over a five-year period and will increase by an average of ten cents per 20 cigarettes in 2022 and 2023. In 2025 and 2026, the average tax increase will be 15 cents per 20 cigarettes. Tobacco duty on a pouch of fine-cut tobacco (40g) will increase by an average of 20 cents in 2022, 2025 and 2026; and of 30 cents in 2023. In addition, the minimum duty on cigars/cigarillos and pipe tobacco will also be raised, and an additional tax on water pipe tobacco will be introduced.
The new legislation will put an end to the differing treatment of cigarettes, nicotine-containing vaping liquids and heated tobacco products. The law stipulates that consumers think of these products as cigarettes and, therefore, the tax treatment of heated tobacco products will be brought into line with that of cigarettes. An additional tax is introduced for heated tobacco products, resulting on a tax burden of 80% of the tax burden on cigarettes of the same number and price situation.
Additionally, by introducing a definition of “substitutes for tobacco products”, nicotine-containing and nicotine-free substances suitable for the consumption of aerosols or vapour produced by means of an appliance (e-cigarettes, for example) will be subject to taxation from 1 July 2022. The tax rate is based on the volume of the substance in milliliters and amounts to EUR 0.16 (from 1 July 2022), EUR 0.20 (from 1 January 2024), EUR 0.26 (from 1 January 2025) and EUR 0.32 (from 1 January 2026).
For more information, please, contact Elke Schroer, Addiction and Drugs Unit, Federal Ministry of Health (Elke.Schroer@bmg.bund.de)