Kiosk owners have sent a letter to the finance ministry asking it to seek an exemption from the EU in relation to an imminent hike in tobacco taxes that would effectively almost double the price of cigarettes and roll-ups.

The proposal also includes for the first time, e-cigs, heated tobacco and nicotine pouches.

The issue was raised by the association of kiosk owners (Sykade) at the House commerce committee.

It said that 50 per cent of their revenue comes from the sale of tobacco products and that the proposed rise in prices would inevitably lead to more smuggling from the north and less business for kiosks, closures, unemployment and further loss of tax revenues.

Sykade argues that Cyprus is in a unique position due to the island’s division where it is harder to detect rampant smuggling.

It said the illegal trade in tobacco products in Cyprus had reached alarming proportions, as 12.8 per cent of cigarettes and 52.6 per cent of rolling tobacco are smuggled from the north while for heated tobacco products the percentage is estimated to be at least 25 per cent.

Sykade added that studies by KPMG and AC Nielsen record at least €50 million in annual loss in tax revenues and VAT. Around 600 kiosks have closed in the last decade due to the decline in legal sales of tobacco products, the association said.

“Each new increase in taxes inevitably leads to a loss of income, jobs and state revenue.”

Under the EU directive, the price of a packet of 20 cigarettes would go up from €4.70 to €7 and a packet of rolling tobacco would rise from €7 to €13. The alternatives would also be subjected to taxes for the first time, doubling their prices as well.

The increases are slated for January 2028.

“This will result in in a dramatic increase in illegal trafficking from the occupied territories and the further weakening of legitimate businesses,” Sykade said.

Currently it estimates that 126 million cigarettes and 162 tonnes of tobacco are smuggled each year from the north.

Based on the island’s division it is asking for an exemption from the directive as a state with “special economic or geographical conditions”.

“In this environment, imposing new increases in legal taxes will not reduce consumption, but will dramatically boost smuggling and deprive the state of further revenue,” it added.

On top of that, existing control mechanisms are unable to deal with current level of smuggling across the divide, Sykade said.

Last month, Commissioner for Climate Action and Clean Development Wopke Hoekstra described the reform as necessary, stressing that Europe still has some of the highest smoking rates globally. The EU aims to reduce the smoking rate to below five per cent by 2040.

Around 34 per cent of people in Cyprus smoke, one of the highest rates in Europe, with 46 per cent of men and 22 per cent of women identifying as current smokers.

According to the Commission’s statement, the update could generate around €15 billion in additional annual revenue across the bloc and save nearly €6 billion in healthcare costs linked to tobacco-related diseases.

Several member states, including Italy, Bulgaria and Romania, have warned that steep excise hikes could fuel illicit trade, while Greece, Croatia, Luxembourg and Hungary say the increases are too high.