Background:
Since 2011, when the EU Directive 2011/64 on tobacco excise duty was adopted, cigarette consumption declined in the 27 EU countries combined, but the tobacco excise revenue did not increase.

Objectives:
To estimate the impact of excise taxation and the industry pricing policy on cigarette retail price, governmental revenue and industry profit margins.

Methods:
European Commission released data on cigarettes for consumption, excise revenue and the weighted average price (WAP), for each country, were used to calculate cigarette market value (as sales × WAP) in 2011 and 2018 for the 27 EU countries, individually and combined. The EU average values were calculated for excise rate and WAP to estimate the industry part of the cigarette price calculated as ‘retail price – excise – VAT’.

Results:
EU-27 cigarette market value decreased from €114.9 billion in 2011 to €113.8 billion in 2018, or by 1%, while the sales decreased from 583 billion to 460 billion cigarettes, or by 21%. Per 1000 cigarettes, the WAP increased from €197 to €248 or by 26%; average excise rate from €132 to €162 or by 23%; the industry price from €32 to €44, or by 38%. The governmental cigarette excise revenue declined from €77 billion in 2011 to €74.5 billion in 2018 or by 3%, while the cigarette industry net-of-tax sales increased from €18.7 billion to €20.3 billion or by 9%.

Conclusions:
The cigarette industry increased its part of the retail price in order to maximize short-run profits. Such price increase engineered a greater decrease in cigarette consumption in the EU than the excise tax alone, but the governmental excise revenue declined. The industry increased its profits despite substantial sales decline. Tobacco taxation policy in the EU should be more aggressive to ensure both tobacco consumption decline and revenue growth, regardless of the industry policy.