I had to also look that up. I thought this was specifically a Lithuania thing. It looks like it's both Lithuania and EU regulations. I didn't realize Lithuania was an EU member.
That's the point, though. The taxes are there to discourage use. Certainly smuggling from lower-tax or tax-free places is going to be expected in that scenario, but it doesn't mean that the higher taxes aren't working for the intended purpose. Sure, they're working less than they could have in the absence of smuggling, which you probably are never going to be able to fully stamp out, but that's ok.
It doesn't look like it's so much a tax issue as it is a labor issue. (Well, it is a tariff issue and tariffs are taxes).
My guess is that they aren't growing enough tobacco to meet local demand which has ultimately kicked up prices.