Portugal Gambles on Pricier Cigarettes and Spirits to Fund Budget

Households already squeezed by higher food and energy prices may soon feel a new pinch. Lisbon’s latest spending plan banks on bigger takings from tobacco and alcohol, wagering that consumers will still light up and raise a glass even as prices climb. That optimistic forecast is colliding with warnings from doctors, industry lobbyists and budget-watchers who argue the strategy could backfire on both public health and revenue.

More money from cigarettes and spirits, less room in family budgets

Government accountants are counting on an extra €80 million, lifting total duties on tobacco, beer, wine, spirits, ready-to-drink cocktails, nicotine pouches and other products to roughly €1.99 B next year. For many families this means every pack and every celebratory bottle will carry a higher price tag, eroding disposable income just as mortgage rates have started to edge up again.

How the numbers break down: what the Treasury expects

The draft budget projects €1.676 B from the tobacco levy, a 4.4 % jump, while the IABA—the duty on alcoholic beverages and sugary mixers—should add €317 M, or 2.5 % more than in 2025. Officials say these gains stem from “anticipated growth in private consumption”. Importantly, the headline rates on beer and spirits remain unchanged; the bulk of the extra cash comes from a planned 2 % rise in the cost of the tax stamp for cigarettes and the debut tax on nicotine pouches, set at 6.5 cents per gram.

Public health experts question the math

Pulmonologists, cardiologists and epidemiologists interviewed by Portuguese media describe the forecast as “policy schizophrenia”. They argue that if the duties truly discourage usage—one of the stated goals—the volume sold should fall, not rise. Daniel Coutinho, a respiratory specialist, warns that the budget “treats smoking as a cash cow” even though lung disease already costs the SNS hundreds of millions annually. Rui Nunes, professor of bioethics, adds that long-term health costs could dwarf the extra tax receipts, pointing to earlier studies that link every €1 earned in tobacco tax with roughly €1.40 in future treatment expenses.

Industry fears a spike in cross-border shopping

Trade groups for both beer and cigarette manufacturers say higher Portuguese duties widen the gap with Spain, encouraging weekend trips for cheaper cartons and crates. The ANEBE spirits association claims contraband already represents about 4.5 % of tobacco consumed nationwide, with a revenue hit close to €100 M. They invoke the Laffer curve—the idea that beyond a certain point higher rates shrink collections—to argue that Lisbon could lose ground if smuggling accelerates along the Alentejo and Beira frontiers.

EU scoreboard: still at the lower end—except for wine

Even after the planned hikes, Portugal’s levy on a standard pack will sit below the new minimums floated in Brussels, where the Commission has suggested lifting the EU floor on cigarettes from €90 to €215 per 1 000 sticks. Conversely, the country continues to charge zero specific duty on table wine, a policy shared with several Mediterranean neighbours but criticised by some northern capitals as a distortion. On beer and spirits, Portuguese rates hover around the lower third of the EU-27 league table, giving the Finance Ministry some buffer before it risks falling foul of single-market rules.

What shoppers should brace for in 2026

Retailers expect cigarette packs to rise by €0.15-€0.20, depending on brand, while a bottle of gin or rum could climb by roughly €0.30 once distributors pass through the updated IABA. Portable nicotine pouches—popular among younger adults—may jump about €1 per tin. Health advocates hope the sticker shock nudges consumers toward quitting; the Treasury hopes they keep buying. By spring, supermarket receipts will reveal which side read the Portuguese mood more accurately.