At the start of October 2026 the minimum price of a packet of cigarettes in Gibraltar went up by as much as 46 per cent. Not the average price. The floor, below which a shop is not allowed to sell. That is what the treaty looks like when it stops being a document and turns up on a shelf. The topic we set out to write was a price guide for before the treaty bites. It has already bitten, so here is the honest version: what changed, what did not, and what we still cannot tell you. Gibraltar sets minimum retail prices for four categories of cigarettes and publishes them quarterly in the Gibraltar Gazette. The latest set was gazetted on 2 October 2026 and [reported by GBC](https://www.gbc.gi/news/retail-tobacco-prices-rise-by-23-46-per-pack-of-20-sept). These are prices per packet of 20. | Cigarette category | Minimum before | Minimum now | Change | | Ordinary | 2.70 GBP | 3.35 GBP | up 24.1 per cent | | Mid Ordinary | 3.00 GBP | 3.69 GBP | up 23 per cent | | Mid High | 3.20 GBP | 4.68 GBP | up 46.3 per cent | | Premium | 4.20 GBP | 5.44 GBP | up 29.5 per cent | The mechanism behind those numbers is in the treaty itself. The Government's [technical notice on the customs union](https://www.gibraltar.gov.gi/press-releases/technical-notice-basic-features-of-the-customs-union-between-gibraltar-and-the-eu-722026-11670) says EU minimum excise rates apply to tobacco and alcohol from the moment the treaty takes effect, and that a retail price differential mechanism of 0.80 EUR or 15 per cent applies to cigarettes. In plain terms, Gibraltar may now only be cheaper than Spain by the smaller of those two margins. The gap is capped by agreement, so it cannot drift back open. Parliament had to pass a [Tobacco Act amendment](https://www.gbc.gi/news/parliament-passes-tobacco-act-amendment-enabling-setting-minimum-retail-prices-tobacco) to give itself the power to set these floors in the first place. Expect the numbers above to move again, because they are gazetted every quarter. This is the part most pages get muddled, so here it is cleanly. Gibraltar has not joined the EU customs territory. It has formed a customs union with the EU, which is a different thing, and the technical notice says so in its first paragraph. On the day the treaty took effect, the old import duties ceased and two new charges took their place: a transaction tax on goods placed on the Gibraltar market, and excise duties on exactly three things, tobacco, fuel and alcohol. The transaction tax is not VAT. [Gibraltar still has no VAT](https://taxsummaries.pwc.com/gibraltar/corporate/other-taxes), and the transaction tax is charged once, when goods are imported or leave a Gibraltar production site to be sold here, rather than at every stage of a supply chain. The practical effect on a shelf price is similar. The legal structure is not. | Transaction tax rate | What it applies to | | 0 per cent | Food and non alcoholic drink, water, medicines and medical equipment, books and newspapers, solar panels on homes | | 5 per cent | Children's clothing, footwear and car seats, bicycles including electric, live plants and cut flowers, art and antiques | | 15 per cent | The standard rate, everything else, rising to 16 per cent in year two and 17 per cent in year three | Two details in that table do real work. Food and medicine are zero rated, so a weekly shop did not jump in July. And the standard rate is not fixed at 15 per cent: the notice sets a floor at the lowest standard VAT rate in any member state, currently 17 per cent, and the rate climbs to meet it. Here is the correction that matters most for anyone doing the arithmetic in their head. The usual framing is that Gibraltar went from tax free to 15 per cent. It did not, because Gibraltar was not tax free. [Import duties were levied on goods entering Gibraltar, mostly at rates between 0 and 12 per cent](https://en.wikipedia.org/wiki/Taxation_in_Gibraltar), with fixed amounts rather than percentages on food, alcohol and tobacco. So the real change on a given item is the gap between whatever duty it used to carry and the transaction tax it carries now. On something that was already at 12 per cent, that is a modest step. On something that sat at zero, it is the whole 15. There is a trap inside that. The Government's own [consolidated FAQ](https://www.gibraltar.gov.gi/uploads/_PressOffice/Consolidated%20FAQ%20Questions%20Report.pdf) states that goods currently subject to reduced rates or exemptions from import duty will not be exempt from transaction tax unless the new regime specifically covers them. An old exemption does not carry across. That is how an item can get more expensive even though nothing about it changed except the paperwork. The same FAQ confirms transaction tax is levied on the customs value including any excise duties attached. So on tobacco and alcohol the two charges stack, and the transaction tax is calculated on a figure that already contains the excise. > The duty free gap has not closed. It ha