TIRANA, Dec. 17 – According to a study on tobacco taxes conducted by the ‘Institute for Health Research and Policy – The University of Illinois at Chicago’ in collaboration with researchers from the Balkans, an increase of excise taxes on tobacco products could benefit Southeastern European countries by decreasing tobacco consumption, increasing government revenue and adding redistributive effects. The six countries in the SEE region used as case studies were Albania, Kosovo, Montenegro, North Macedonia, Serbia and Bosnia and Herzegovina, as cigarette and tobacco consumption constitute a huge burden to their economies. Despite having one of the highest smoking prevalence in Europe, Albania has the lowest tax burden on tobacco among the Western Balkans countries.
The tobacco issue in Albania has persisted throughout the years, though with slight improvements after the 2015 law enforcement on the smoking ban. Based on the research data, both genders are prone to increasing tobacco consumption, as are younger age groups. Currently, “the total tax burden on cigarettes stands around 66 percent of the retail selling price of a pack of 20 cigarettes of the most sold brand” and it taxes 49 euros per 1,000 cigarette sticks. Based on the EU regulations however, excite duty should not be less than 90 euros per 1,000 cigarette sticks “irrespective of the weighted average retail selling price.”Therefore, Albania does not currently comply with these specific EU regulations.
Based on previous excise taxes on tobacco, the study reports that further increase of the excise tax, which in turn would raise the prices by 25 percent, would result in an overall decrease in consumption by 15.0 percent, and additional tax revenue collection of 17.9 percent. Therefore, more taxes would lead to higher revenue, despite previous claims by tobacco companies. Additionally, the price increase would also have an impact on the consumption and expenditures of Albania’s low income group. Seeing as low-income groups are highly responsive to price increases, through a 25 percent price increase, the study indicates that consumption would decline by 27.1 percent and still generate an additional 0.5 million euros in government revenue. Middle and high-income groups would be affected less, by 4.8 percent and 16.4 percent respectively, but would nevertheless add a total combined amount of 29.3 million euros to government revenue.
The results are similar for the other SEE countries, with the exception of Kosovo, where price increase does not decrease smoking prevalence but could reduce the amount of cigarettes consumed by smokers, by 10 percent . As for the increase in government revenue, the highest would be in Kosovo, “with an estimated increase of 26 percent, followed by Serbia and Albania with over 17 percent increased revenues. The lowest increase in budget revenues could be expected in Bosnia & Herzegovina, due to a very high price elasticity, where an increase in the specific excise of 25 percent would result in a 2.5 percent increase in budget revenues.” However, the study suggests that policy makers also take into account the rise in income, as all countries have high income elasticity and therefore demand for tobacco could increase.
