Netherlands Tobacco Tax Hike Drives Cross-Border Sales

Netherlands Tobacco Tax

Recent significant increases in tobacco taxes in the Netherlands, aimed at curbing smoking rates, have led to a substantial rise in Dutch smokers purchasing cheaper tobacco products abroad, according to new research by the Dutch public health agency. While the tax hikes did result in some smokers quitting or reducing consumption, the ease of cross-border shopping in a small, wealthy country is undermining the policy’s overall effectiveness.

In 2024, the Netherlands increased the price of cigarettes by 24% and roll-your-own tobacco by 45%. Analysis revealed that while approximately 7% of smokers quit and 22% reduced their consumption, a significant portion simply shifted their purchasing habits. Dutch smokers bought around 60% of their tobacco products in other countries after the tax was introduced, a notable jump from 40% in 2023 and 30% in 2020.

The public health agency stated, “Policy should focus on reducing purchases of tobacco products abroad,” and recommended restrictions on the quantity of tobacco products individuals can bring into the country. Furthermore, the agency called for the introduction of excise taxes on e-cigarettes (vapes) to reduce the likelihood of young people becoming addicted to vaping before potentially switching to traditional cigarettes.

The World Health Organization (WHO) advocates for high tobacco taxes as an effective measure to reduce smoking, recommending a minimum tax rate of 75%. While price controls are generally more effective in low-income countries, the Dutch experience suggests that in affluent nations with open borders, “pricing policy is becoming less and less effective” if neighboring countries maintain significantly lower prices. The agency expects quitting rates to decrease unless tobacco prices rise in neighboring countries.

This situation could change, as the European Commission is considering substantial EU-wide increases in tobacco taxes, including a potential 139% hike for cigarettes and 258% for rolling tobacco, alongside new taxes for vapes. Last year, the Netherlands and 15 other EU countries urged the Commission to act, citing distortions to the single market caused by varied national tax rates. Across the EU, cigarette taxes vary widely, from €1.92 per pack in Bulgaria to €9.92 in Ireland, with the Netherlands having the second-highest rate at €7.66.

Matthew Ma
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