Tobacco Taxation as a Policy Tool for Strengthening Public Health and Fiscal Revenues in Montenegro (2025-2027)

This Policy Brief was written by the Institute for Socio-Economic Analysis (ISEA) in Montenegro. The policy brief simulates the impact of various tobacco tax reform scenarios to assess the impact on consumption, tax revenues, and public health. Specifically, the researchers consider three scenarios: no change in the specific or ad valorem tax in the next two years (Scenario 1), continuing the annual increase of €3 in the specific excise tax to €56.5 per 1,000 sticks in 2025 and €59.5 per 1,000 sticks in 2026 (Scenario 2), and a 15% annual increase in the specific excise tax (Scenario 3). The findings show that scenarios 2 and 3 would decrease adult smoking prevalence by 1.03% and 3.34%, respectively, while saving 459 and 1,481 lives from premature smoking-related death, respectively. In Scenario 1, on the other hand, adult smoking prevalence would increase 0.35%. Scenario 3 would also prevent 2,781 youth from becoming smokers, compared to to 1,174 youth under Scenario 2. The simulation shows that the larger tax increase in Scenario 3 would result in the largest tax revenue gains of 6.25% in 2026 and 6.56% in 2027. The policy brief concludes with recommendations for policy makers to implement significant and sustained tax increases to reduce smoking prevalence while raising tax revenue for the government.