Podgorica, Montenegro – November 30th, 2018
Venue: Media Center, Podgorica
Dynamic increase in excise rates in Montenegro causes a significant decrease in cigarettes consumption, and consistent implementation of legal solutions and cross-sectoral cooperation will enable the increase of state revenues from excise duties.
This was announced at the round table ” Accelerating progress on effective tobacco tax policies in low- and middle-income countries – the case of Montenegro”, which was organized by the Institute for Socio-Economic Analysis (ISEA).
Project director Ana Mugoša said that the difference in prevalence between men and women decreased in the period from 2000 to 2017. Additionally, the overall prevalence of smoking in the youth population is high, 18.7 percent, with a higher proportion of women compared to the male population. She stressed the alarming availability of tobacco products to children.
According to Mugoša, the World Health Organization (WHO) survey showed that, without regulatory changes, smoking prevalence in adults would rise to 52 percent by 2035, with majority being woman.
She pointed out that the survey, conducted by the ISEA, showed that an increase in excise taxes on cigarettes in Montenegro causes a significant decline in cigarette consumption and an increase in government revenues. Recommendations related to tobacco control policy indicate that it is necessary to increase excise taxes, in order to influence price increase, reduce cigarettes consumption and increase public revenues. It is necessary to redirect the revenues from excise taxes increase in health care programs. Moreover, it is necessary to harmonize the tax system in the region in order to prevent cross-border transactions.
“We must strive to the full harmonization with EU directives regarding excise taxes, reduce youth smoking prevalence and implement effective programs that will be directed toward youth”, Mugoša said. The assessment of the ISEA suggests that an increase in specific excise from 0.6 to 0.8 euros per cigarette pack and an increase in ad valorem excise for 2 per cent would lead to an increase in the average price of cigarettes per pack by 12.3 per cent, consumption decline by 7 percent, and the overall government revenue increase by 8 percent. “If we assume the increase in specific excise duty from 0.8 to 1 euro per cigarette pack and increase in ad valorem excise duty by 2 percent, this would lead to an increase in the average price of cigarettes per pack by 23.8 percent, a decrease in consumption by 14 percent and increase of state revenues by 12.35 percent”, Mugoša explained. Senior researcher Mirjana Čizmović explained that the empirical research, based on the data from 2001 to 2017, confirmed that the increase in excise taxes on cigarettes leads to a reduction in consumption. “The increase in cigarette retail prices by 10% leads to a reduction in cigarette consumption by 6.2% in the long run and at the same time has a positive impact on fiscal revenues. On the other hand, if income increases by 10 percent, cigarettes would be more affordable and would increase cigarette consumption by 2.32 percent. Therefore, the increase in income could neutralize the effects of price increases to a certain level”, explained Čizmović. She pointed out that the results of the research can serve as a significant input for strategic planning of tobacco taxation policies. Senior researcher on the project, Tanja Laković, said that there is a willingness of Montenegrin institutions to decrease number of smokers.
She pointed out that the Excise Policy is defined by the Law on Excise, which changed in the process of the harmonization with EU directives. “The specific excise duty as of September 1st 2018 is 0.6 euros per cigarette pack, while the ad valorem tax is 32 percent. Law on excise foresees an increase in specific excise duty by 7 cents between 2018 and 2023 and a reduction of the ad valorem excise rate by 1.5 percent, “Laković said. She pointed out the clear regulatory framework, but still consistent application of legal solutions is needed.
Director of the Institute of Economic Sciences in Belgrade – Project coordinator for the region of the Western Balkans, Jovan Zubović, pointed out that the analysis was objective, as did the interpretation of the obtained results. “There is neither the aim no to protect, nor to attack the tobacco industry, but simply to offer the results that are absolutely and surely accurate and not selectively drawn out,” Zubović said. In the part of informing policy makers, the idea is, as he said, to initiate a dialogue. “We will provide input data and we will support tax policy creation, which should be in the interest of the entire society, and not just certain interest groups”. He announced that seven national studies for seven countries will be published, as well as a significant number of scientific-based researches.
The project “Accelerating progress on effective tobacco tax policies in low- and middle-income countries” was successfully implemented in seven countries of the region in cooperation with the Illinois University of Chicago and funded by Bloomberg Philanthropies. The Round table was attended by representatives of the Ministry of Finance, Ministry of Health, Tobacco Agency, Institute of Public Health, World Health Organization, Cancer Society and MONSTAT.