Tobacco Industry Group Warns Tax Hike Could Collapse Legal Market

The German Federation of the Tobacco Industry and Novel Products (BVTE) has sharply criticized a government draft for a new tobacco tax law. The association believes the proposed measures risk significantly destabilizing Germany's legal tobacco market, weakening regulated distribution channels, and further eroding the tax base.

Jan Mücke, BVTE's Chief Executive Officer, stated that current tobacco tax policies are failing. In 2025, the federal government collected 17.6 billion euros in tobacco taxes. However, from January to May 2026, receipts fell to just 5.208 billion euros, a 20.5 percent decrease compared to the same period last year. Mücke attributes this decline, along with a tax increase in January 2026, to a significant shift towards the illegal market.

Mücke cited France and the Netherlands as examples where tax hikes have led to increased cross-border purchasing and a substantial rise in illegal tobacco trade. He warned that higher taxation benefits organized crime and results in considerable revenue losses for the state. The BVTE maintains that consumers will not tolerate excessively high tax rates, leading to billions in budget deficits.

The industry group highlighted recent law enforcement successes, including the dismantling of a professional, disguised illegal cigarette factory in May 2026 and another in February 2026. These operations underscore the extent of organized crime and illicit production. BVTE advocates for a tobacco tax policy that balances fiscal objectives, public health protection, and the stability of the regulated market.