Germany Considers Significant Increase to Premium Cigar Taxes

Germany is considering a substantially revised tobacco tax proposal that would increase excise taxes on premium cigars beginning January 1, 2027. The latest draft amendment, released on July 13th, represents a significant departure from the legislation approved by the German Cabinet just one week earlier, replacing a more modest tax increase with a substantially higher ad valorem tax on cigars and cigarillos. If adopted, the proposal would fundamentally change how cigars are taxed in Germany by shifting a much greater share of the excise tax to the retail price of the product, resulting in significantly higher tax liabilities for premium cigars.

The Proposed Increase

On July 6th, the German Cabinet approved legislation proposing gradual increases to tobacco taxes across several product categories. Under that proposal, cigars and cigarillos would have seen a relatively modest increase in the ad valorem tax rate—from 1.47 percent to 3.83 percent—along with phased increases to the specific excise duty and minimum tax over multiple years.

A week later, however, lawmakers introduced a revised draft amendment that significantly expands the proposal. 

Rather than increasing the ad valorem tax rate to 3.83 percent, the amendment would raise it to 21.05 percent beginning January 1, 2027—the same ad valorem rate proposed for cigarettes. 

Although the proposal would initially reduce the specific per-item excise tax, the dramatic increase in the price-based component would substantially increase the overall tax burden on premium cigars, particularly higher-priced products. The proposal also includes gradual increases to the minimum excise tax through 2030.

If enacted, the proposal could have significant consequences for the German premium cigar market, one of the world’s most important markets for New World cigars. According to industry reports, Germany’s premium cigar market is already facing headwinds from broader economic challenges affecting the country. A tax increase of this magnitude would likely place additional pressure on manufacturers, retailers, and consumers, potentially accelerating market contraction and reducing cigar sales. 

What’s Next

The proposed amendment has not yet been adopted. The legislation is expected to be considered by the German Parliament following its summer recess, with discussions anticipated to begin in September. 

The Bundesverband der Zigarrenindustrie (BdZ), Germany’s cigar industry association, has issued a statement strongly opposing the proposal and is actively meeting with Members of the German Parliament to express its concerns ahead of the bill’s anticipated consideration in September.

CRA will continue monitoring the proposal and will work closely with our partners at the European Cigar Manufacturers Association (ECMA) to oppose the proposed tax increase. We will continue to provide updates as the legislation moves through the parliamentary process.