Even if the number of smokers decreases, does the government still want tax revenue? The dilemma of national finances reflected in Germany's tobacco tax increase

Tobacco Tax "Higher Than Government Proposal" Emerges in Germany

In Germany, Europe's largest economy, a policy that directly impacts smokers' wallets is becoming more realistic.

Reported on August 27, 2026, the news is that the ruling coalition in the German Bundestag, consisting of the Christian Democratic Union/Christian Social Union (CDU/CSU) and the Social Democratic Party (SPD), is planning to significantly increase the tobacco tax beyond what the government had already proposed.

According to the reported amendment, the tax rate on cigarettes will be raised to 29.49 cents per cigarette in 2027, 32.15 cents in 2028, and 35.04 cents in 2029, eventually reaching 38.19 cents by February 2031.

The government's proposal aimed for 35.8 cents by 2030, so the parliament is effectively seeking an additional increase.

The targets are not limited to regular cigarettes. Higher tax rates than the previous proposal are also being considered for cigars, cigarillos, rolling tobacco, and pipe tobacco.

Importantly, this is not merely a health policy; the German government and ruling parties clearly view the tobacco tax as a "revenue source."

If the amendment is realized, the federal government's tax revenue is expected to increase by about 1.5 billion euros in 2027 alone, exceeding the initially anticipated amount by about 766 million euros.

Furthermore, by 2030, additional tax revenue is projected to expand to around 4.4 billion euros, about 846 million euros more than the previous plan.

The German Federal Ministry of Finance itself positions this tobacco tax law amendment as one of the "fiscal consolidation measures" to reduce the fiscal demands on the federal budget. In other words, there is a clear aspect of this as a revenue measure to alleviate chronic fiscal pressure, alongside the goal of curbing health damage.

As of August 28, 2026, this amendment has not yet been finalized as law. The tobacco tax law amendment proposed by the government is still in the parliamentary process, and future deliberations could change the tax rates and implementation conditions.

By 2030, "About 11.8 Euros per Pack"

For consumers, the most straightforward question is ultimately, "How much will a pack cost?"

According to estimates presented by the German Federal Ministry of Finance regarding the government proposal as of July, a pack of 20 cigarettes, currently averaging around 8.05 euros, could rise to approximately 8.77 euros in 2027, 9.56 euros in 2028, 10.42 euros in 2029, and around 11.36 euros in 2030.

However, subsequent reports incorporating the stronger tax increase being considered by the ruling coalition suggest that the price in 2030 could be around 11.8 euros.

Of course, the government does not set the selling price itself. The final price will vary due to manufacturers' and importers' pricing strategies, raw material costs, and logistics costs, so it does not mean it will "definitely be 11.8 euros."

Still, if the price rises from the current approximately 8 euros to nearly 12 euros over several years, the burden on smokers will be quite significant.

For someone who smokes a pack a day, this could mean an additional monthly burden of over 100 euros, which, on an annual basis, would have a non-negligible impact on household finances.

Why Make Tobacco So Expensive?

Another pillar cited by the government and ruling parties for the tax increase is "health."

Although smokers have already become a minority in Germany, they are not an uncommon presence.

According to the German Federal Statistical Office, 19.1% of those aged 15 and over smoked at least occasionally in 2025. This is not a significant improvement from 18.9% in 2021, and there is a slight trend of increasing smoking among young people in recent years.

On the other hand, the sales volume of cigarettes has significantly decreased in the long term.

In 2025, 66.4 billion cigarettes were taxed in Germany, less than half compared to 146.5 billion in 1991.

In other words, "while it is decreasing in the long term, the habit of smoking itself has not disappeared."

Research accumulated by the WHO and others has shown that price increases are a powerful policy tool to reduce tobacco consumption.

In high-income countries, it is widely estimated that a 10% increase in price generally results in a 4% reduction in tobacco consumption. Young people and low-income groups are particularly responsive to price changes, so effects such as "reducing the number of people starting to smoke" and "encouraging quitting" are expected.

From this perspective, Germany's tax increase is quite a typical "health tax."

However, the issue is not that simple.

"For Health," Yet Taxes Aren't Exclusively for Healthcare

A very interesting aspect of this discussion is the use of tax revenue.

"Since smoking-related illnesses increase healthcare costs, we should raise tobacco taxes and use them for healthcare and smoking cessation support."

Hearing this, many people would find it easy to agree.

In fact, the SPD argues that the high tax rate will lead to the prevention of tobacco-related diseases and reduce the health damage costs borne by society as a whole.

However, according to the German Federal Ministry of Finance, additional revenue from tobacco taxes is, in principle, included in the general budget.

In other words, it is not predetermined that "all this tax increase will be used for smoking cessation support" or "solely for hospitals."

The government explains that as a result of being included in the general budget, it will also be indirectly used for healthcare and health policies, but for those opposed to the tax increase, the question remains, "Isn't it ultimately to fill the fiscal deficit?"

This issue has been repeatedly raised in Germany.

In the past, tobacco taxes have been raised against the backdrop of various fiscal needs, such as security and social security.

Furthermore, Germany's tobacco tax revenue reached 17.63 billion euros in 2025.

Reducing the number of smokers is desirable as a health policy. On the other hand, from the perspective of national finances, tobacco tax is also a significant source of revenue.

"Does the country really want to reduce smokers to zero, or is it more convenient financially if a certain number continue to smoke?"

This contradiction always accompanies tobacco policy.

On Social Media, Voices Welcoming "Even Higher" Increases

So how do the people of Germany view this tax increase?

On social media, particularly on German-speaking Reddit, there has been active discussion about the tobacco tax increase since July, prior to this amendment.

Surprisingly, there are many voices supporting the tax increase itself.

Comments like "This is quite a rational policy by the government" and reactions from smokers themselves saying, "If they had raised it sooner, it would have been an opportunity to quit smoking" can be seen.

There are also posts from users who have successfully quit smoking for a long time, reflecting on how they avoided spending tens of thousands of euros, in addition to health benefits.

Underlying this type of opinion is the idea that "tobacco is not a necessity."

Unlike taxes on food, electricity, rent, or fuel necessary for commuting, tobacco is a discretionary purchase with clear health risks, so the logic is that it's acceptable to impose high taxes.

On the Other Hand, Criticism of "Just Taxing the Addicted"

Opposition is also strong.

Particularly prevalent is the impact on low-income groups.

People with nicotine addiction cannot easily quit smoking the next day just because the price has gone up.

Therefore, simply raising the price means that low-income smokers will have to cut back on living expenses to buy tobacco, leading to criticism that "it's more of an additional tax on the addicted than a health policy."

In Reddit discussions, it was pointed out that if smoking rates are higher among those in socio-economically challenging situations, a simple price increase could widen disparities.

There are also many opinions saying, "I would agree if the tax revenue is truly used for health policies, but I can't agree if it goes into the general budget."

This highlights the complex issues surrounding tobacco tax.

Economically, low-income groups are more sensitive to price changes, so the proportion of those who quit smoking due to price increases is higher. In that sense, the long-term health benefits are significant.

However, for those who couldn't quit, the proportion of tobacco costs in their income rises.

Depending on whether one prioritizes "health benefits" or "current household burden," the evaluation of the same tax increase can be completely opposite.

Concerns About "Expansion of the Black Market"

Another recurring topic on social media is smuggling and the informal market.

There is concern that if prices are raised too high, more people will avoid purchasing from legitimate stores and instead bring in products from neighboring countries or buy from illegal sales routes.

On social media, Australia, where tobacco prices are extremely high, is often cited, with opinions suggesting "there is a limit to price increases."

The German Federal Ministry of Finance is also aware of this concern.

The government acknowledges that the potential for tax avoidance and shifts to illegal markets exists with any tax, but explains that there is no established independent data on how much the black market would expand due to a tax rate increase.

Moreover, since tobacco taxes are also rising in neighboring EU countries, a significant increase in cross-border purchases is not anticipated.

How to Handle Vapes and Heated Tobacco

In the Reddit thread discussing this news on August 27, the focus was more on "What will happen to vapes and liquids?" rather than cigarettes themselves.

Germany already has a tax system for e-cigarette liquids, and users express dissatisfaction, saying, "While making cigarettes expensive, if heavy taxes are also imposed on alternatives, where are we being led?"

From a policy perspective, if only cigarettes are made expensive, consumers might simply switch to other products, limiting both tax revenue and the health policy effect.

Therefore, the German government's proposal is designed to gradually increase taxes across a wide range of categories, including cigarettes, heated tobacco, pipes, water pipes, and alternatives for e-cigarettes.

Judging by social media, opinions are quite divided on whether "reducing cigarette consumption" and "reducing nicotine products overall" should be treated as the same policy.

It should be noted that these opinions on social media are not a public opinion survey, but reactions observed in specific online communities like Reddit. They do not represent the views of the entire German population.

From Japan's Perspective, It's Not Just "Germany's Issue"

When viewing this news from Japan, it's important not to end the discussion with "Europe has expensive tobacco."

Japan is already moving in a direction quite similar to Germany.

According to the Ministry of Finance, Japan's tobacco tax revenue, including both national and local taxes, has been hovering around 2 trillion yen annually.

For a typical pack of 20 cigarettes, priced at 580 yen, 304.88 yen is solely for national and local tobacco taxes. Including consumption tax, about 60% of the retail price is a very high tax burden.

And the tax rate will continue to rise.

In the 2025 tax reform, as a measure to secure funding for strengthening defense capabilities, the national tobacco tax will be increased by 0.5 yen per cigarette in three stages in April 2027, April 2028, and April 2029.

In total, this will add 1.5 yen per cigarette, or 30 yen per pack, in taxes alone.

Additionally, in 2026, the taxation method for heated tobacco will be revised.

In other words, in Japan as well, there is a structure where tobacco tax is used more from the perspective of securing financial resources, including national defense, rather than for "health." The issue of "overlapping health policy and fiscal policy" in Germany is not irrelevant to Japan.

Japan's Smoking Rate Declines, Yet Tax Revenue Remains About 2 Trillion Yen

According to the Ministry of Health, Labour and Welfare's 2024 National Health and Nutrition Survey, the percentage of people who currently smoke habitually is 14.8%.

In the long term, Japan's smoking rate has significantly declined.

However, even as the number of smokers decreases, tobacco tax remains an important revenue source of about 2 trillion yen annually for both national and local governments.

Here, too, the same structure as in Germany can be seen.

As a health policy, the aim is to reduce the number of smokers.

As a fiscal policy, the aim is to maintain stable tax revenue.

These two goals are compatible in the short term. If the tax rate is raised while consumption decreases gradually, it is possible to secure tax revenue while also reducing the smoking rate.

However, if the number of smokers becomes extremely low in the long term, the significance of tobacco as a tax source will naturally diminish.

How governments around the world will reconcile the path to "zero smoking" with "reduced tax revenue" is an unavoidable issue in the future.