Tobacco Tax Modeling: Evidence from North Macedonia [Working Paper Series]

This Working Paper was written by Analytica in North Macedonia. The working paper assesses the impact of increasing tobacco taxes on tax revenues and public health. Specifically, the researchers model the impact of a 10%, 30%, and 50% specific excise tax increase on tobacco, considering various elasticities of demand. The findings show that the tax collection would increase in all of the scenarios considered. The highest increase in excise and total tax collection of 22.45% and 21.45%, respectively, would occur following a 50% increase in the specific excise tax under the assumption that demand is more elastic. On the other hand, the smallest increase in excise and total tax collection of 5.23% and 4.86%, respectively, would occur following a 10% increase under the same assumption. These tax increases would also prevent premature tobacco-related death among current adult smokers and youth who would be discouraged from smoking initiation. Following a 50% excise tax increase and assuming a higher elasticity of demand, 34,278 and 1,596 premature deaths of current adult smokers and current youth would be averted, respectively. The working paper concludes with recommendations for policy makers to significantly raise excise taxes to reap the fiscal and public health benefits.

A Policy Brief based on this working paper can be found here.