I listened to a recent Highland Radio piece that interviewed a politician who represents Inishowen, a peninsula in the north of County Donegal in Ireland. Councillor Ali Farren spoke to the Letterkenny-based radio station about the impact of Ireland’s new licensing rules for retailers selling cigarettes and vaping products, and cautioned against the regulations' potential to harm small local retailers.
Let’s take a look at what’s happening.
Ireland’s cigarette and nicotine licensing rules
Retail licensing schemes are something of a mixed bag. Political and media obsession with youth access to tobacco is hard to temper, and licensing provides a way to regulate, control, and punish retailers who don’t follow the rules by, for example, selling to under-18s.
In the UK, the Tobacco and Vapes Act 2026 creates a retail licensing scheme in England, Wales, and Northern Ireland, while also strengthening Scotland’s existing retail register. It’s not clear when that will start, with estimates suggesting sometime by 2029. Ireland’s equivalent started last Sunday.
Ireland already had a tobacco retail registration system, but the licence fee system is new. Before this change, retailers who sold tobacco products only had to register and pay a once-off €50 levy under the older system. Now, they must find €1,800 to satisfy the annual licence fee, with €1,000 permitting tobacco sales and €800 for nicotine products.
While that is small change for big retailers, as Cllr Ali Farren says, it’s a different matter for smaller, rural shops.
Second-order consequences
Farren rightly points out that cigarettes are already a very low-margin item for small rural shops. Similar to items like milk and newspapers, these products help drive additional custom, which means shopkeepers can wear these low-profit items. However, the licensing scheme changes the maths somewhat.
Cigarettes' gross margins are typically around 4-6%. If a pack sells for about €15, a 4–6% gross margin is something about €0.60–€0.90 per pack. At that level, a shop would need to sell roughly 2,000–3,000 packs a year just to cover the €1,800 fee. Of course, this doesn’t include staff time, admin, card fees, shrinkage, or other overheads.
Ireland already puts a lot of pressure on small businesses thanks to corporation tax, income tax, VAT, employer PRSI, and administrative compliance. While the hostile environment might not be quite at the level of Labour in the UK, it’s still tough going for retailers already struggling with rising costs and the impact of online shopping and competition from larger chains and out-of-town retail.
Indeed, as the Highland Times points out, one business in Malin Head has decided to stop selling these products due to the new rules. If more follow suit, it could result in minor job losses in what is already a relatively small labour market.
A tiered market
While I personally prefer more open markets, if we must have a cigarette and nicotine licensing fee, I’m not sure that a small family shop should be paying the same licence as a Tesco or similar. Indeed, the schemes could still fine retailers up to the current €4,000 for underage sales, but just reduce or waive the annual fee for sole traders.
Businesses in these parts of the country are already under a lot of pressure to compete in the modern environment, and any policy that reduces their footfall or increases their likelihood of closure will have an outsized impact on rural communities like Inishowen.
