"Portugal has reservations about applying equal taxation to cigarettes and other forms of smoking that are less harmful to health. The proposal also seeks to transfer a substantial portion of tobacco tax revenue from member states to the EU budget. In the Portuguese case, the current proposal could result in a loss of national tax revenue of up to €1.5 billion, which, naturally, cannot be accepted under the current conditions," according to an official source from the Ministry of Finance, led by Joaquim Miranda Sarmento.

The Ministry of Finance is reporting two proposals from Brussels: one amending two directives on tobacco taxation and excise duties, and another on the resources that each member state must allocate to the EU budget, expanding the scope of revenue collected from cigarette sales.

"On July 16, the proposal to revise European Union Directive 2011/64 on the structure and rates of excise duties on manufactured tobacco was presented. This will involve changes to two legal instruments: the Tobacco Taxation Directive and the Council Directive on the general arrangements for excise duties," the Ministry of Finance details.

It adds: "On July 16, the European Commission also presented the proposal for the Multiannual Financial Framework 2028-2034 (MFF 28-34), which includes the own resources proposal, which includes three new sources of revenue for the Community budget, one of which is the transfer of part of the excise duty on tobacco collected by the Member States."

"Considering that tobacco taxation is harmonized at the European Union level, and that market dynamics have changed significantly, Portugal cannot help but express strong concerns about the meaning of this European Commission proposal," the Ministry of Finance warns.

The ministry, led by Joaquim Miranda Sarmento, indicates that the "proposal aims to equally tax cigarettes and less harmful forms of smoking."

"Since taxes are a form of disincentive, we believe that less harmful forms of smoking should be subject to less severe taxation to encourage smokers to switch to these products," it states.

The Brussels proposal also aims to "increase tobacco taxes, which will have a direct impact on price increases and encourage increased illicit trade, as has occurred in other European countries. This is an economic policy error and will have negative effects on tax revenue," the same official source notes.