Montenegro : Overview of Tobacco Use, Tobacco Control Legislation and Taxation
Montenegro became a Party to the WHO Framework Convention on Tobacco Control in 2006 and ratified the Protocol to Eliminate Illicit Trade in Tobacco Products in 2017. Tobacco excise hikes, undertaken in Montenegro in 2009-2011, were successful both...
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| Format: | Report |
| Language: | English |
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World Bank, Washington, DC
2019
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| Online Access: | http://documents.worldbank.org/curated/en/646321561400173562/Montenegro-Overview-of-Tobacco-Use-Tobacco-Control-Legislation-and-Taxation http://hdl.handle.net/10986/32061 |
| Summary: | Montenegro became a Party to the WHO
Framework Convention on Tobacco Control in 2006 and ratified
the Protocol to Eliminate Illicit Trade in Tobacco Products
in 2017. Tobacco excise hikes, undertaken in Montenegro in
2009-2011, were successful both in fiscal and public health
terms. Revenues from tobacco excises rose from about 4
million in 2007 to 44 million euro in 2011. Annual cigarette
sales declined from more than 1.5 billion cigarettes in
2008-2011 to less than 1 billion cigarettes in 2014 and
further years. However, in 2013-2016, tobacco excise
increases were too small to reduce tobacco affordability and
tobacco sales, and tobacco revenues did not change much. In
August 2017, Montenegro adopted an ambitious plan of excise
tax increases; however, the tobacco industry responded with
series of hidden actions (forestalling and price
over-shifting) which temporarily reduced tobacco excise
revenue in early 2018. As the next high increase of excise
rate was scheduled for January 2018, and at the same time,
VAT rate increased from 19 to 21, the industry substantially
increased cigarette supply in the second half of 2017 and
sharply reduced it in early 2018 as it already had in stocks
large numbers of cigarettes for which excise was paid in
2017. The excise revenue substantially increased in late
2017, but declined in early 2018 despite the excise rate
increase. The industry organized the media campaign to
persuade the government that this revenue decline was
allegedly caused by tax-driven growth in cigarette smuggling
(while no rigorous evidence of such growth was presented),
and the only way to fight smuggling is the reduction of
cigarette excise. From September 2018, the excise rates were
reduced, while they are still higher than those planned
before 2017. The plan of annual tobacco excise changes until
2025 was already adopted by authorities, but the proposed
changes have rather low potential to reduce the tobacco
consumption and to increase government revenue. The expected
total excise rate in 2025 will be below 90 euro (minimum EU
level). Montenegro is able to conduct a more aggressive and
successful tobacco taxation policy which can both reduce
tobacco consumption and increase tobacco revenue. |
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