The Serbian government is proposing to increase tobacco taxes, including those levied on heat-not-burn (HnB) products. The proposal to amend the country’s Excise Act suggests a steady gradual increase in heated tobacco taxes from 2021 until 2025. Find out all the aspects of the market and regulatory environment in Serbia here.
Market background in Serbia: tobacco market
Serbia, which is in the process of joining the EU by 2025, has one of the highest smoking rates in Europe.
According to the 2017 Eurobarometer survey and the most recent data published by the Institute of Public Health of Serbia in 2019, more than a third of Serbia’s population smoke – approximately 35% of men and 30% of women.
The Covid-19 pandemic forced small retail shops such as specialist tobacconists to close for a month, and continued to force shopping malls to remain closed – along with all of the heated tobacco kiosks in them. In spite of this, the country increased its tobacco production in the first five months of 2020 by 18.8% compared to the same period in 2019, according to the secretary of the Association for Plant Production and Food Industry in the Serbian Chamber of Commerce (SCC).
The main reason is the growth of exports. Since domestic production increase is not connected with domestic consumption, this suggests that although the Serbian tobacco market is heading towards a more smoke-free market, its tobacco market will still continue to produce for other EU countries.
The local tobacco industry has estimated a decrease of 10% in cigarette consumption in the first half of 2020, mainly due to restricted movement, limited store hours, and a higher demand for cheaper cigarettes – legally and illegally.
Increases in price and excise taxes have been defining the Serbian tobacco market, in an attempt to restrict its consumption and, in the meantime, generate more income through taxes.
In 2003 Philip Morris International (PMI) acquired DIN “Tobacco Factory”, the largest tobacco factory in Serbia, located in Niš. Domestic consumption does not seem to be driving the increase in local cigarette production, although having strategic locations such as this factory ensures an advantageous position for tobacco companies’ market control – both domestic and foreign.