Tobacco taxation and pricing

All seven countries in the SEE region have the sovereign right to determine their tobacco taxation policies according to their geographical and economic structures and national public health and fiscal objectives. Tobacco tax systems can vary depending on circumstances and can come in the form of a single or a mixed excise tax system. In addition, value-added taxes (VAT) and import taxes/duties are imposed as well.

All tobacco products are subject to an excise duty in all countries. According to official data, cigarettes generate over 95% of total tobacco products consumption. Among the seven observed countries, Albania and Kosovo apply only a specific excise, while other countries apply a combined tobacco excise system (Table 5).

  Ad valorem(% of retail sales price) Specific (€ per 1000 sticks) VAT rate (%)
Albania 46.4 20%
B&H 42% 34.5 17%
Croatia 34% 41.0 25%
Kosovo 45.0 18%
Macedonia 9% 33.5 18%
Montenegro 32% 30.0 19%
Serbia 33% 29.5 20%

In terms of the tax burden per pack, taking into account the rates in Table 6 and the weighted average price per country, in 2017 the specific excise per pack was the highest in Albania (€0.94) and in Kosovo (€0.90); the only excise tax levied in these two countries. They are followed by the other five countries in the region which apply a mixed excise tax system. Of these, Croatia had the largest specific excise per pack (€0.84), followed by B&H (€0.69), Macedonia (€0.67), Montenegro (€0.60), and Serbia (€0.59). The ad valorem tax per pack is again the highest in Croatia (€1.1), followed by B&H (€0.86), and Montenegro and Serbia (€0.67 each). Macedonian cigarette consumers pay the lowest ad valorem tax in the region at €0.12 per pack (Figure 3).

The share of excise tax in a weighted average price varies from 44.0% in Kosovo up to 75.7% in B&H, while the share of total tax in weighted average price ranges from 66.0% in Albania and Kosovo to 90.2% in B&H (Figure 4).

Regional study- Part 4 "Tobacco Taxation and pricing", page 12

Figure 4 Share of excise and total tax in weighted average price of cigarettes, 2018

  % of excise in price % of total tax in price
Albania 48.0 66.0
B&H 75.7 90.2
Croatia 60.0 80.0
Kosovo 44.0 66.0
Macedonia 58.8 74.0
Montenegro 60.6 77.9
Serbia 61.0 77.7

Excise tobacco tax revenues have been increasing in nominal terms in all countries. There is a difference in the pace of growth, with Montenegro having the slowest growth, whereas Macedonia has the fastest increasing trend (Figure 5).

The price of cigarettes in the region vary significantly. Comparing the retail price of Marlboro Red by country, it ranges from €2.2 in Macedonia to €3.75 in Croatia. The cheapest brand of cigarettes in Macedonia is sold at a price of €0.97, while in Croatia smokers must spend €2.14 for a pack of the cheapest cigarette brand (Figure 6).