Tax Foundation Europe has released a new opinion arguing that governments should overhaul tobacco excise rules to reduce the harm caused by smoking by adopting tax policies that encourage the switch to less harmful nicotine products.

According to the organization, alternative tobacco products (ATPs), such as e-cigarettes, heated tobacco, nicotine pouches and snus, are significantly less harmful than combustible cigarettes, a conclusion supported by broad scientific consensus. The opinion stresses that although these products are not risk-free, they pose far lower health risks and are already contributing to reductions in cigarette consumption.

The Tax Foundation Europe argues that current excise tax systems fail to reflect this “continuum of risk” and risk undermining harm-reduction progress. Instead, it proposes a modernized tax framework built on specific (quantity-based) excise taxes rather than ad-valorem taxes, and based on product categories aligned with relative harm.

The organization suggests the following structure:

• Category 1 (most harmful ATPs): taxed at 50% of the cigarette tax rate

• Category 2: taxed at 25% of the cigarette tax rate

• Category 3: taxed at 10% of the cigarette tax rate

• Category 4 (least harmful products, such as nicotine-replacement therapy): no excise tax

Proposed tax structure for alternative nicotine products:

• vapor products – specific per milliliter

• HTP – specific per ounce

• snus – specific per ounce

• nicotine pouches – specific per ounce

The opinion argues that ATPs should remain significantly cheaper than cigarettes to incentivize smokers to switch, noting that ATPs generate little to no external harm compared with combustible tobacco.

Tax Foundation Europe concludes that governments revising tobacco excise rules, especially in the EU amid talks on updating the Tobacco Excise Directive, should focus on reducing smoking-related harm rather than imposing prohibition-style taxes. A risk-based, transparent excise system, it says, would support one of the most promising public-health shifts in decades.