Strengthening Public Health and Fiscal Revenues in Montenegro: Tobacco Taxation as a Policy Tool

This Policy Brief was written by the Institute for Socio-Economic Analysis in Montenegro. The policy brief simulates the effect of three excise tax scenarios on cigarette consumption, smoking-attributable deaths, and tax revenue collection. In the first scenario, excise taxes increase slightly in 2025 but stay the same in 2026, per the excise calendar. Scenario 2 represents a modest tax increase in 2025 and 2026, while scenario 3 represents a higher tax increase in both years. In scenario 1, the slight price increase is insufficient to offset wage growth, leading to an increase in prevalence and consumption, along with a 8.93% increase in excise tax revenues in 2025 and a 2.04% increase in 2026. The larger price increases in scenarios 2 and 3 reduce prevalence and prevent premature deaths among smokers. In scenario 3, specifically, prevalence would decrease by 0.73%, preventing 325 premature deaths in adults, while raising excise revenues by 11.94% in 2025 and 5.62% in 2026. Furthermore, youth smoking prevalence would decrease by 5.89%, thus saving the lives of 821 youth. The policy brief concludes with recommendations for policy makers to implement larger excise tax increases to improve public health and raise additional revenues.