Tobacco tax evasion in Western Balkan countries: Tax evasion prevalence and evasion determinants
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Institute of Economic Sciences Belgrade, Belgrade, Serbia
Faculty of Economics, University St Kliment Ohridski Bitola, Prilep, North Macedonia
Analytica - Thinking Laboratory, Skopje, North Macedonia
Center for Economic Research and Graduate Education - Economics Institute (CERGE-EI), Prague, Czech Republic
Group for Legal and Political Studies, Pristina, Kosovo
Faculty of Economics, University of Banja Luka, Banja Luka, Bosnia and Herzegovina
Faculty of Economics, University of Tirana, Tirana, Albania
Publication date: 2022-07-05
Tob. Prev. Cessation 2022;8(Supplement):A73
There is a need to analyze tobacco tax evasion in six Western Balkan (WB) countries (Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia). Tax evasion is defined on the basis of available information on tax stamps, health warnings, price, and the place of purchase, in accordance with previous research on tax evasion.

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 (SEE) region.

Data from 2019 Survey on Tobacco Consumption in Southeastern Europe (STC-SEE) is used. STC-SEE provides a uniquely comparable nationally representative data set on smoking behavior adults aged 18–85 years for each country.

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 manufactured cigarettes (MCs) (8.6%). While HR tobacco is predominantly illicit in all six countries, MC tax evasion varies significantly, with evasion being significantly higher in Montenegro, and Bosnia and Herzegovina. The 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.

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 prevention of illicit markets 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.

Illicit trade in tobacco products: recent trends and coming challenges
Guillermo Paraje, Michal Stoklosa, Evan Blecher
Tobacco Control
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