Brazil tax reform: 1 key update — 7 mins
Hey, I’m Douglas, Editor-in-Chief of the Brazilian Tax Reform Portal 🇧🇷.
1) Tobacco in Europe
The European Economic and Social Committee (EESC) issued, on February 18, 2026, an opinion on the proposal to revise the Tobacco Taxation Directive presented by the European Commission (read more)
The provision foresees an increase in minimum taxes on traditional cigarettes as well as on new products, such as electronic cigarettes, hot tobacco, and nicotine pouches.
The EESC’s final decision was to support the modernization of the tax rules applied to tobacco in the European Union. However, it expressed concern about the economic and social impacts of more rapid changes, advocating for a gradual transition accompanied by support measures for businesses and workers.
The document was approved during the committee’s 603rd plenary session, in Brussels, with 198 votes in favor, 38 against, and 19 abstentions. In the text, the committee acknowledges the need to update the European tax model in light of market developments and the emergence of new products, but argues that the revision should be conducted with caution, respecting criteria of proportionality, predictability, and economic sustainability.
RISKS
Throughout the debate, members highlighted that unexpected increases in taxation may generate unintended reactions, such as encouraging illicit trade and reducing Member States’ revenues.
Concerns were also raised about the impacts of the measure on small and medium-sized enterprises, workers in the sector, and regions economically dependent on the tobacco production chain, especially in rural areas.
Despite this, part of the committee expressed support for using taxation as a tool to reduce tobacco consumption, provided it is accompanied by greater enforcement capacity, cooperation among authorities, and measures to combat smuggling.
The opinion also emphasizes that tax policies should take into account differences among Member States and the specificities of each product category.
AMENDMENTS
During the review, most of the proposed amendments were rejected. Still, some changes were unanimously approved and incorporated into the final text:
Amendment 1 (Matteo Borsani and Florian Marin): calls for a detailed mapping of jobs and skills in the sector, with medium- and long-term impact assessments, as well as the implementation of reskilling and upskilling measures and the involvement of social partners in managing the transition;
Amendment 2 (Matteo Borsani and Florian Marin): highlights that changes in tobacco taxation may have disruptive effects on companies and workers in the sector;
Amendment 3 (Matteo Borsani and Florian Marin): calls for socioeconomic and territorial impact assessments, focusing on regions dependent on tobacco production, and provides for support measures for workers and producers;
Amendment 4 (Matteo Borsani and Florian Marin): advocates the involvement of social partners in policymaking, with transparency and prior consultation;
Amendment 16 (Matteo Borsani and Andris Gobiņš): establishes that tax adjustments should be predictable, economically sustainable, and aligned with the specific characteristics of each product category;
Amendment 17 (Andris Gobiņš): reinforces the need to expand enforcement capacity, data sharing among authorities, and strategies to combat illicit trade;
Amendment 19 (Andris Gobiņš): recommends the early development of alternative economic activities to mitigate potential job losses, especially in rural regions;
Amendment 30 (Group I): reinforces the principle that lower-risk products should be taxed differently (“less harm, less tax”), citing as an example the reduction in smoking rates in Sweden.
The rejected amendments included proposals advocating more substantial changes to the text, such as modifications to how tax rates are adjusted based on inflation, stricter limitations on the use of delegated acts by the European Commission, and additional revisions to the criteria for risk-proportionate taxation.
The opinion also emphasizes that core elements of tax policy—such as the tax base, product definitions, and minimum tax levels—should remain under the control of the ordinary legislative process, preserving the fiscal sovereignty of Member States. Therefore, the use of delegated acts by the Commission should be limited to technical aspects, such as inflation updates.
🇧🇷🔍 Brazil is changing. Are you watching closely?
If you found this content helpful, share it with a colleague, your team, or someone from your company. It really helps us grow and reach more people who, just like you, are looking to understand and get ready for Brazil’s tax reform.
