Background:
Despite many efforts to reduce smoking, Serbia remains one of the leading countries in smoking prevalence, with around 38% of adult smokers.

Objectives:
We aimed to examine how the increase in tobacco excise taxes may influence tobacco consumption, and related outcomes – government revenues, premature deaths, and smoking initiation.

Methods:
In this study, we used various data sources, including the Statistical Office of the Republic of Serbia, the Ministry of Finance, and the Tobacco Administration. To apply a simulation model, we considered 2023 as the baseline year and forecasted the changes for the subsequent two years. Our simulation model was based on the assumption of a 15% annual increase in specific excise taxes.

Results:
The assumed increase in specific excise leads to a retail price increase of 10.2% in 2024 and 11.3% in 2025. The estimation showed that tobacco consumption is expected to decrease by 4.7% in 2024 and 5.3% in 2025, resulting in a total prevalence of 35.5% in 2025. As the government revenues include all taxes, we estimated that the total revenue would increase by 6.6% in 2024 and 6.6% in 2025. However, we observed a progressive pattern regarding the number of avoided premature deaths among smokers; the results showed that 320 and 678 people could avoid death in the subsequent two years in case a hypothesized tax increase is applied. In addition, this change could deter over 17,000 youth (aged up to 24) from smoking initiation.

Conclusion:
Overall, our study provides clear evidence that increasing specific excise taxes by at least 15% can have multiple positive effects. These findings can also be seen as a policy recommendation – Serbia needs to increase tobacco taxes to reduce smoking effectively.