Taxing tobacco for better health and higher public revenues: A simulation-based analysis from Serbia.

Abstract

Introduction: Tobacco taxation is widely recognized as one of the most effective policy measures for reducing tobacco use and saving lives. The aim of this study is to estimate the fiscal and public health effects of increasing cigarette excise taxes in Serbia, an upper middle-income country with historically high smoking prevalence and increasing affordability in recent years.

Methods: A simulation-based analysis was conducted to estimate the effects of an annual increase in the specific excise tax per cigarette pack in Serbia. The baseline year was 2023, with projections for two years. Changes in cigarette consumption were estimated using price elasticity, income elasticity, and cross-price elasticity derived from previous research. The model assessed impacts on cigarette consumption, government revenues, smoking prevalence, smoking-attributable premature mortality, and youth smoking initiation, under assumptions of full price pass-through, a constant illicit market share, and no inflation.

Results: An increase in cigarette excise taxes is associated with higher retail prices (10-11%) and reductions in cigarette consumption (-4.7% in the first year and -5.3% in the second year) and smoking prevalence (from 37.9% at baseline to 35.8%). Youth smoking initiation declined across all age groups, with >17000 individuals deterred from initiating smoking. Government revenues from tobacco increased over the observed period, as higher tax revenues per pack outweighed reductions in sales volumes, with excise tax revenues rising by about 7% annually. Declines in smoking prevalence resulted, among other effects, in reductions in premature smoking-attributable mortality, with 320 premature deaths avoided in the first year and 678 in the second year.

Conclusions: The findings indicate that increasing cigarette excise taxes in Serbia can yield substantial public health benefits while strengthening government revenues. Further research accounting for substitution toward other tobacco or nicotine products would strengthen the evidence base and provide a more comprehensive assessment of the health and fiscal impacts of tobacco tax policies.