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Tobacco tax evasion in Western Balkan countries: tax evasion prevalence and evasion determinants
  1. Marko Vladisavljevic1,
  2. Jovan Zubović1,
  3. Olivera Jovanovic1,
  4. Mihajlo Djukic1,
  5. Natasa Trajkova Najdovska2,3,
  6. Ereza Pula4,
  7. Dragan Gligorić5,
  8. Aida Gjika6,7
  1. 1Institute of Economic Sciences, Beograd, Serbia
  2. 2Faculty of Economics, University St Kliment Ohridski, Bitola, Macedonia
  3. 3Analytica Think Tank, Skopje, Macedonia
  4. 4Prishtina, Albania
  5. 5Faculty of Economics, University of Banja Luka, Banja Luka, Bosnia and Herzegovina
  6. 6Faculty of Economics, University of Tirana, Tirana, Albania
  7. 7Development Solution Associates, Tirana, Albania
  1. Correspondence to Dr Marko Vladisavljevic, Institute of Economic Sciences, Belgrade 11000, Serbia; marko.vladisavljevic{at}ien.bg.ac.rs

Abstract

Background and objective Tobacco tax evasion undermines the goal of tobacco taxes as a tobacco control measure to make tobacco products less affordable, increases the health risks for those who smoke and decreases the government revenue. This paper analyses the tobacco tax evasion in six Western Balkan (WB) countries: Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia. The aim of this research is to estimate the size of the illicit market and identify the main determinants of tax evasion activities in the Southeastern European region.

Data and methods Data from 2019 Survey on Tobacco Consumption in Southeastern Europe (STC-SEE) are used. STC-SEE provides uniquely comparable nationally representative data on smoking behaviour for adult (18–85 years old) population for each country. Tax evasion is defined on the basis of available information on tax stamps, health warnings, price and the place of purchase, in accordance with the previous research on tax evasion. In order to estimate the determinants of illicit purchases we use binary choice model of tax evasion.

Results The study finds that 20.4% of all current smokers in WB countries evade taxes on tobacco products, with evasion being much more frequent for hand-rolled (HR) tobacco (86.7%) than for the manufactured cigarettes (MC) (8.6%). While HR is predominantly illicit in all six countries, MC evasion varies significantly, with evasion being significantly higher in Montenegro and Bosnia and Herzegovina. Results further suggest that tax evasion is higher in the statistical regions where institutional capacities to tackle illicit trade are lower, in municipalities bordering countries with high MC evasion, as well as among smokers with low income, women and elderly. We also provide evidence that higher tobacco taxes and prices do not increase illicit consumption.

Conclusion The findings from the research suggest that in order to decrease tax evasion, governments should put additional effort to strengthen institutional capacities to tackle illicit tobacco markets. Furthermore, improving regional coordination in development and implementation of tobacco control policies, including the prevention of illicit market, is essential in lowering evasion in all WB countries. Finally, WB countries should regulate and enforce excise tax stamp requirements on the HR tobacco market to a much higher degree.

  • price
  • taxation
  • illegal tobacco products
  • low/middle income country

Data availability statement

Data are available upon reasonable request. Data used in this research were obtained from the 2019 Survey on Tobacco Consumption in Southeastern Europe (STC-SEE), which provides nationally representative data on smoking behaviour for adult population for six Western Balkan countries (Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia). Data collection was coordinated by Deep Dive—a private, independent, full-service social and market research consulting firm, and under supervision of the Institute of Economic Sciences, Belgrade, Serbia. The data can be shared with third parties upon reasonable request.

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Data availability statement

Data are available upon reasonable request. Data used in this research were obtained from the 2019 Survey on Tobacco Consumption in Southeastern Europe (STC-SEE), which provides nationally representative data on smoking behaviour for adult population for six Western Balkan countries (Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia). Data collection was coordinated by Deep Dive—a private, independent, full-service social and market research consulting firm, and under supervision of the Institute of Economic Sciences, Belgrade, Serbia. The data can be shared with third parties upon reasonable request.

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Footnotes

  • Contributors MV: conceptualisation, methodology, writing—original draft, review and editing, data analysis, guarantor. JZ: methodology, writing—annex 2, funding acquisition and project administration. OJ: methodology, writing—original draft preparation and annex 2. MD: methodology, writing—original draft, review and editing, annex 2. NTN, EP, DG, AG: methodology, writing—annex 2.

  • Funding This research was funded by the University of Illinois at Chicago’s Institute for Health Research and Policy through its partnership with the Bloomberg Philanthropies (grant number 16809). Research of the authors from the Institute of Economic Sciences in Serbia has been additionally supported by the Ministry of Education, Science and Technological Development of Serbia.

  • Competing interests None declared.

  • Provenance and peer review Not commissioned; externally peer reviewed.

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