A debate over “taxation and the black market” is quietly heating up at the center of European tobacco policy discussion. Recently, senior executives from British American Tobacco (BAT) publicly warned against the EU’s proposed tax increase, stating that excessive taxation of e-cigarettes and heat-not-burn products could lead to a repeat of Australia’s “black market expansion.” These remarks have resonated strongly in European public policy circles and refocused the issue of balancing health harm reduction with fiscal revenue.
The European Commission is pushing for a revision of the new Tobacco Taxation Directive, which for the first time will include e-cigarette liquids, nicotine pouches, and heated tobacco under a unified taxation system. This reform aims to narrow tax rate disparities among member states, prevent “tax arbitrage,” and increase public revenue. However, BAT argues that excessively high tax rates could drive consumers to the illegal market, undermining both government revenue and the regulatory system. Company executives warned that Australia’s experience serves as a cautionary tale for the EU. Driven by that country’s high tobacco tax policies, the illicit tobacco trade has exploded in just a few years, with the black market share soaring from single digits to nearly 40%, costing governments billions of Australian dollars in tax revenue.
Policymakers in EU member states such as Germany, France, and Spain are closely watching this debate. Proponents of tax increases argue that raising prices will help curb tobacco and nicotine consumption, thereby achieving public health goals. Opponents, however, emphasize that e-cigarettes and heat-not-burn products are inherently “harm-reducing products” and should not be taxed the same way as traditional cigarettes. The German government has also recently adopted a more cautious stance, arguing that raising taxes without clearly distinguishing risk levels could undermine the positive impact of e-cigarettes in smoking cessation and harm reduction.
BAT’s warning is not an isolated incident. Several industry associations, research institutions, and consumer organizations have also called on the EU to base tax rates on “science, not politics.” They argue that e-cigarettes and cigarettes pose significant differences in health risks. Subjecting them to the same tax framework would obscure the risk gap and mislead consumers, discouraging some smokers who might otherwise be willing to switch from cigarettes to e-cigarettes. This logic is fully reflected in the UK’s “Tobacco Harm Reduction Strategy.” The UK government explicitly supports e-cigarettes as a smoking cessation aid and consistently maintains a significantly lower tax burden than traditional cigarettes, establishing a “harm reduction model” widely recognized by the global health community.
Against this backdrop, the European e-cigarette industry faces a new policy turning point. Veehoo, an international e-cigarette brand with many years of experience in the EU market, has actively participated in policy discussions on taxation and regulation. Veehoo’s position is clear: reasonable taxation helps regulate the market, but excessive taxation only hinders harm reduction efforts. The brand is committed to providing adult smokers with safer and healthier alternatives through technological innovation and quality assurance. In markets such as Germany, the Netherlands, and Italy, VEEHOO’s “Clean Vapor” series of products has won widespread user adoption thanks to its low-temperature atomization technology and stable nicotine delivery mechanism. Its product compliance and safety standards fully meet the requirements of the EU’s TPD (Tobacco Products Directive).
In a media interview, VEEHOO executives pointed out that overly aggressive tax policies would not only discourage the development of compliant businesses but also potentially allow illegal channels to take advantage. Once consumers discover that black market products are cheap and easily accessible, they will undermine the competitiveness of legitimate brands, hindering the healthy transformation of the entire industry. Indeed, the Australian case demonstrates this point: after the government raised tobacco taxes, legal retail sales plummeted, while smuggled cigarettes, illegal e-liquids, and counterfeit products proliferated. Ultimately, this not only compromised consumer safety but also led to a loss of government tax revenue.
The EU is currently seeking feedback from all parties, hoping to find a balance between fiscal, health, and market stability. Some member states have proposed a “tiered tax system”—setting tax rates based on product risk. For example, maintaining high taxes on traditional cigarettes to discourage consumption, while imposing moderate taxes on harm-reducing products like e-cigarettes and heated tobacco, encouraging smokers to switch to lower-risk options. This approach has proven effective in countries like the UK and Sweden. VEEHOO believes that this scientifically structured tax system not only ensures government fiscal revenue but also maintains consumer motivation to switch to healthier products, offering the best path to achieving public health goals and sustainable industry development.
In addition to policy, industry self-regulation is equally important. VEEHOO’s “Transparent Supply Chain Initiative” in Europe uses an electronic traceability system to record the production, transportation, and sales of every product, ensuring compliance and traceability of sources. This approach has significantly impacted combating black market sales and provided reliable data support for government regulation. Furthermore, the brand is actively engaging in consumer education, launching a “Responsible Use Initiative” that emphasizes that e-cigarettes are only for adult smokers and strictly prohibit sales to minors. This proactive approach to social responsibility has established VEEHOO’s positive corporate image in the European market and serves as a model for the positive development of the entire industry.
It is worth noting that the EU’s tax increase plan also incorporates environmental and social considerations. Some policymakers believe that tax increases can be used to fill the financial gap in the e-cigarette waste recycling system. However, industry insiders point out that real environmental challenges should be addressed through technological and recycling system innovation, rather than relying solely on tax pressure. Veehoo’s exploration in this area is representative. Its newly launched “EcoAir” series of disposable products is designed with recyclable materials, and it implements a “recycling voucher program” in some European countries, where users who return their discarded devices receive discount vouchers to purchase new products. This model not only reduces the environmental burden but also strengthens trust between brands and users.
Reflecting on Australia’s lessons, the crux of the problem lies not in the “tax” itself, but in the fact that “excessive tax rates” have squeezed the legal market, fostering a black market. If the EU wants to avoid falling into the same trap, it must maintain rationality and science in its policy design. While the warning from British American Tobacco executives reflects an industry perspective, their core point remains relevant: any policy that deviates from market and consumer behavior is likely to backfire.
A recent report from the German Institute for Economic Research confirms this view. The report indicates that if e-cigarette tax rates were raised to levels similar to those for cigarettes, legal market sales would be expected to decline by over 40%, while the black market could double in size. Researchers recommend that the EU, while imposing taxes, strengthen law enforcement and cross-border oversight to prevent the influx of illegal products. Furthermore, a unified product tracking system should be established to ensure information sharing among member states and jointly maintain market order.
In this complex policy debate, international brands like VEEHOO stand out as particularly rational. They are not simply opposed to taxation, but rather advocate for science and balance. They believe that the direction of the e-cigarette industry should not be driven by short-term fiscal targets, but rather centered around three core pillars: health and harm reduction, innovation and compliance, and sustainable growth. VEEHOO’s continued investment in R&D, responding to regulatory challenges with technological innovation and earning the trust of users and governments with its responsible brand image, is crucial to the European e-cigarette industry’s resilience amidst the turmoil.
Ultimately, the debate over “tax increases and the black market” is not just a game between businesses and governments, but also a test of Europe’s commitment to public health. Striking a balance between curbing addiction, safeguarding finances, and promoting harm reduction will determine the direction of tobacco policy across the region. Germany’s caution, the UK’s practices, and Australia’s lessons all offer different reference paths for the EU. The active participation of brands like Veehoo also demonstrates the emergence of a more mature and responsible industry.
BAT’s executives’ warning serves as a timely reminder: while the policy’s starting point is certainly important, its ultimate goal should be practical effectiveness. If the EU can incorporate scientifically graded and industry-wide incentives into its new tax system, it will not only prevent the spread of the black market but also promote a shift in society towards healthier lifestyles. As Veehoo has always advocated, true public health is achieved not through prohibition but through rationality, innovation, and collaboration. Perhaps Europe’s future lies in this rationality.
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