State budget and taxes Cigarettes will be more expensive in Luxembourg in 2025

Cigarettes will become more expensive in Luxembourg next year. The Ministry of Finance in Luxembourg announced that a 5.5 percent increase in excise duties on tobacco will be approved by parliament in December with the state budget for 2025.

The higher prices are also likely to affect smokers in the Grand Duchy's neighborhood, as only a small proportion of cigarettes sold in Luxembourg are actually smoked in Luxembourg.

The price increase could make the cheapest pack of 20 cigarettes around 30 cents more expensive, according to the Ministry of Finance in Luxembourg. However, if the manufacturer or seller decides to pass on part of the increase in excise duty to their profit margin, the price increase will be correspondingly lower.

According to the Ministry of Finance, Luxembourg regularly increases the taxation of tobacco products. The policy of neighboring countries is also taken into account. A statement from the Chamber of Deputies also mentions the health aspect: Young people in particular should be deterred from buying cigarettes by the price increase. In 2023, the tax rate was raised by 2.7 percent.

Revenue of 1.6 billion euros

Luxembourg's customs administration estimates that around 4.9 billion cigarettes will be sold in the country this year. Less than 5 percent of cigarettes sold in Luxembourg are also consumed there, according to an answer to a question from MEPs. Most buyers come from neighboring countries because of lower prices. A pack of 25 cigarettes currently costs 10 euros in the Netherlands and 13 euros in France. In Luxembourg, the price will then rise to 8 euros in 2025.

The customs administration in Luxembourg expects revenues of 1.6 billion euros in the coming year if VAT is also taken into account in addition to the cigarette tax. This means that around 5 percent of the entire national budget will be financed with revenue from the sale of cigarettes and tobacco. By 2028, according to customs experts, this will even amount to revenue of 1.9 billion euros.

Refueling will also become more expensive

Close to the borders with France and Germany, there are numerous stores and petrol stations in Luxembourg that are clearly geared towards selling cigarettes and alcohol to citizens of neighboring countries.

The sale of alcohol, which is also cheaper in Luxembourg than in neighboring countries, is expected to generate a stable income of around 66 million euros for the consumer retailers.

Refueling will also become more expensive next year: From January 1, 2025, the CO2 tax levied on petroleum products, among other things, will be increased by 5 euros per tonne, the ministry added. The annual increases are provided for in Luxembourg's energy and climate plan for 2021 to 2030.