The latest proposal introduced by Cyprus may offer the clearest path yet to breaking a long-standing deadlock among EU member states over the Tobacco Excise Directive (TED).

The Cyprus compromise, as reported by some media outlets, is said to directly address many of the criticisms that derailed earlier efforts, aiming to strike a balance that can win the support of all 27 member states and finally move the process forward after months of stalled negotiations.

The Tobacco Excise Directive, last set in 2011, establishes minimum excise duty rates across the EU for tobacco products. But the framework is widely seen as lagging behind the rapid evolution of nicotine consumption. In 2025, the European Commission proposed sweeping changes, including increases in minimum excise duties.

The proposal called for a significant rise in minimum taxes on cigarettes and introduced new EU-wide thresholds for products such as heated tobacco and nicotine pouches, extending the directive to categories not previously covered.

The scale of these increases triggered immediate backlash. Countries including Portugal, Italy, Greece, and Romania warned that sharp tax hikes would disrupt legal markets, fuel illicit trade, and ultimately reduce government revenues.

Tobacco taxation is harmonized at the EU level, but the latest update to the Directive dates from 2010, and even Brussels concedes the framework requires modernization on several fronts.

First, the average rate applied at the national level in EU member states already sits well above the current EU-imposed minimum. As a result, those minimum rates have lost their practical force as a tool for reducing consumption.

The overall aim of the legislation remains broadly commendable.

The EU argues that smoking prevalence is not declining quickly enough to meet the bloc’s ambitious “Beating Cancer Plan,” which seeks to reduce tobacco use to below 5 percent of the population by 2040. At present, roughly 24 percent of Europeans still smoke.

Second, the market itself has shifted. Newer products—heated tobacco, e-cigarettes, and nicotine pouches—have gained a foothold across the continent. Harmonizing tax rules across these categories, the Commission maintains, would allow for more effective regulation while still giving member states flexibility to tailor policy to domestic conditions.

Yet this shift is not merely theoretical. It is already reshaping behavior in ways policymakers are struggling to keep up with. Vaping, once a marginal phenomenon, has now overtaken traditional smoking in at least one major European market. In Great Britain, vaping has surpassed smoking for the first time since records began in 1974, a development public health experts say underscores the growing influence of harm reduction strategies.

New data analyzed in a commentary by the Centre of Excellence for the Acceleration of Harm Reduction (CoEHAR), published in the International Journal of Public Health, shows that 10 percent of British adults now use vapes, compared with 9.1 percent who smoke. In absolute terms, that translates to roughly 5.4 million people who vape versus 4.9 million who continue to smoke. The authors describe the crossover as a “notable milestone in tobacco control,” one that complicates the EU’s effort to treat emerging nicotine products primarily as substitutes to be discouraged through taxation.

Brussels, however, has taken a more cautious view. The increased tax burden, officials argue, would reduce the attractiveness of these products as alternatives to cigarettes.

The EU already loses billions annually to illicit tobacco, and several governments contend that steep duty increases could worsen the problem without delivering meaningful public health gains. Lower-tax member states, in particular, fear that such changes would damage domestic industries, cost jobs, and erode fiscal revenues.

In November, Denmark released a revised text, but instead of easing tensions, it hardened opposition. The Danish proposal preserved much of the Commission’s approach and, in some respects, went further, doubling proposed tax rates on heated tobacco and broadening the definition of raw tobacco in a way that could have swept nearly all harvested tobacco into the tax framework.

The result, critics argued, would have been a rapid and significant increase in consumer costs across multiple markets. That approach failed to build consensus and left negotiations effectively stalled.

Cyprus, which assumed the Council presidency in January, has taken a different tack. Its compromise text retains the overall structure of the Commission’s proposal, including higher minimum duties and the inclusion of newer products, but recalibrates key elements to make agreement more attainable.

The Cyprus proposal still raises taxes on tobacco products, but in a more measured fashion than earlier drafts. It introduces a transition period, allowing member states to phase in changes over several years rather than absorb an immediate shock. It also caps inflation-linked increases, replacing automatic indexation with a more controlled mechanism that gives governments greater oversight and flexibility.

Newer products such as heated tobacco and nicotine pouches remain within scope, but at less punitive rates and with greater room for national discretion—two of the central sticking points in previous negotiations.

Early reactions from member states suggest cautious optimism. The Cyprus proposal is increasingly viewed as a pragmatic middle ground capable of breaking the impasse.

Still, any revision to the Directive requires unanimous approval from all 27 EU member states—a threshold that has repeatedly derailed past efforts. Earlier proposals, some argue, were laden with provisions that had little chance of clearing that bar.

Cyprus appears determined to test whether a more calibrated approach can succeed where maximalist ones failed.

Timing is also critical. If no agreement is reached during the current presidency, which ends in the summer, negotiations will pass to Ireland, where officials have already signaled support for more aggressive tax increases.

Such a shift could reset the debate entirely, harden positions, and prolong the stalemate.

A Cypriot official said in an interview, “We have been facilitating an open, transparent, inclusive, and constructive dialogue with all member states with respect to the tobacco taxation directive. In an effort to bridge diverging views amongst member states, we have worked hard to enable discussions to move forward with the aim of achieving consensus, taking into consideration the different positions and concerns of all member states, as expressed during our consultations. We intend to take technical work forward, aiming for substantial progress; if possible, political agreement by June.”

A European Commission spokesman said, “The Commission made proposals to revise the Tobacco Excise Directive in July. It is now in the hands of the co-legislators…The legislative proposals will be sent to the Council for agreement and to the European Parliament and the Economic and Social Committee for consultation.”

European leaders are beginning to recognize that the Cyprus compromise may represent the most viable path forward. If negotiations continue in good faith, Cyprus could yet emerge as the unlikely broker of a deal that has eluded the bloc for years.