Germany’s Tobacco Tax Overhaul Puts Premium Cigars in the Crosshairs

On September 24, 2026, the German Bundestag held its first reading of the federal government’s draft amendment to the Tobacco Tax Act (Tabaksteuergesetz), a measure designed to raise excise duties on tobacco products at regular intervals over a four-year horizon. After a brief twenty-minute debate, the bill was referred to committee, with the Finance Committee (Finanzausschuss) taking the lead.

The fiscal ambitions behind the bill are substantial. The government projects additional tax revenue of €756 million in the coming year, rising to €3.59 billion by 2030. For a standard pack of 20 cigarettes, the weighted average retail price is projected to climb from €8.77 in 2027 to €11.36 by 2030 (Tabaksteuer soll vier Jahre lang regelmäßig erhöht werden, Deutscher Bundestag, September 24, 2026). The government frames the measure as both a budget-consolidation step, tied to the April 29, 2026 fiscal framework decision, and a public-health effort to reduce smoking rates among youth and adults.

Notably, the Bundestag’s own summary of the bill’s first reading enumerates increases for cigarettes, fine-cut tobacco, pipe tobacco, heated tobacco, waterpipe tobacco, and tobacco substitutes — but does not mention cigars by name (Tabaksteuer soll vier Jahre lang regelmäßig erhöht werden, Deutscher Bundestag, September 24, 2026). That omission should not reassure the premium cigar community. The legislative story behind this bill has been one of escalating ambition, and premium cigars have already been swept into its path.

As CRA reported earlier this summer, the German Cabinet approved legislation on July 6th that would have raised the ad valorem tax rate on cigars and cigarillos only modestly — from 1.47 percent to 3.83 percent — alongside phased increases to the specific excise duty and minimum tax. Just one week later, on July 13th, lawmakers introduced a revised draft amendment that dramatically expanded the proposal, replacing the modest increase with a far higher price-based levy.

Rather than settling at 3.83 percent, the amendment would raise the ad valorem rate on cigars and cigarillos to 21.05 percent beginning January 1, 2027 — the same rate proposed for cigarettes. This is precisely the kind of policy failure CRA fights against in the U.S.: treating handmade premium cigars as though they were interchangeable with mass-market cigarettes. Although the amendment would initially reduce the specific per-item excise tax, the sharp increase in the price-based component would substantially raise the overall burden — hitting higher-priced premium cigars hardest — with further increases to the minimum excise tax scheduled through 2030.

The stakes are considerable. Germany is one of the world’s most important markets for New World cigars, and CRA has cautioned that a tax increase of this magnitude would place additional pressure on manufacturers, retailers, and consumers, potentially accelerating market contraction. That market is already under strain: Germany’s Federal Statistical Office reported that sales of cigars and cigarillos fell 6.6 percent in 2025, to 2.1 billion units. Layering a fivefold jump in the ad valorem rate onto a contracting market is a recipe for shuttered tobacconists and lost adult choice — not measurable public-health gains.

CRA’s position is consistent on both sides of the Atlantic: excise-tax increases on premium cigars disproportionately burden small retailers and adult consumers without meaningful public-health benefit. Premium cigars are a distinct, handmade product category and should never be taxed as though they were cigarettes. The Bundesverband der Zigarrenindustrie (BdZ), Germany’s cigar industry association, has strongly opposed the proposal and is meeting with Members of the Bundestag to press its concerns. CRA will continue to monitor the bill as it moves through committee and will work with our partners at the European Cigar Manufacturers Association (ECMA) to oppose it.