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2. Supply of Tobacco Products (Paško Burnać, Phd) Accelerating Progress on Tobacco Taxes in Low-and-Middle Income Countries Research on Economics of Tobacco and Tobacco Taxation National Study: CROATIA University of Split Faculty of Economics, Business and Tourism Split, Croatia, 2018 Publisher: University of Split Faculty of Economics, Business and Tourism For publisher: Prof.dr.sc. Maja Fredotović, Dean Reviewers: dr.sc. Lena Malešević Perović dr.sc. Ana Mugoša Print: DonatGraf, Beograd Edition: 100 copies CIP - Katalogizacija u publikaciji S V E U Č I L I Š N A K N J I Ž N I C A U S P L I T U UDK 336.223:663.97(497.5) 613.84(497.5) ACCELERATING progress on tobacco taxes in low-and-middle income countries : research on economics of tobacco taxation : national study: CROATIA / authors Željana Aljinović Barać ... <et al.>. - Split : University of Split, Faculty of Economics, Business and Tourism, 2018. Bibliografija. ISBN 978-953-281-082-0 e-ISBN 978-953-281-083-7 1. Aljinović Barać, Željana I. Pušenje -- Hrvatska -- Statistički podaci II. Pušenje -- Prevencija -- Državna politika III. Duhan -- Upotreba -- Prevencija i kontrola IV. Porezna politika -- Hrvatska 170617088 The publication of this scientific monograph is approved by the Senate of the University of Split at plenary held December 20th, 2018. This scientific monograph is funded by the University of Illinois at Chicago’s Institute for Health Research and Policy through its partnership with the Bloomberg Philanthropies. Copyright © University of Split - Faculty of Economics, Business and Tourism, 2018 Authors: Željana Aljinović Barać, Paško Burnać, Ljerka Markota, Andrijana Rogošić, Slavko Šodan, Tina Vuko Research on Economics of Tobacco and Tobacco Taxation National Study: CROATIA Editor: Željana Aljinović Barać Split, 2018. Table of Contents Foreword ............................................................................................................... 1 Executive Summary ............................................................................................... 3 1. Introduction ................................................................................................. 5 2. Supply of tobacco products (Paško Burnać, PhD) ......................................... 11 2.1. Tobacco farming ........................................................................................... 12 2.2. Production of tobacco products ................................................................... 15 2.3. Employment in the sector ............................................................................ 17 2.4. Export and import for tobacco products ...................................................... 20 2.5. Most recent trends in tobacco industry ....................................................... 24 3. Demand for tobacco products (Željana Aljinović Barać, PhD) ........................ 27 3.1. Smoking prevalence ..................................................................................... 27 3.2. Youth tobacco use ........................................................................................ 33 3.3. Tobacco product consumption .................................................................... 35 4. Tobacco taxation and pricing policies (Andrijana Rogošić, PhD) .................... 41 4.1. Institutional setting and policy framework for tobacco control .................. 41 4.2. Tobacco control measures ........................................................................... 44 4.3. Relevant legislation for tobacco control ...................................................... 46 4.4. Impact of tobacco taxation on the price of the tobacco products .............. 51 4.5. Tobacco tax revenues ................................................................................... 57 5. Elasticity of tobacco products – time series analysis (Tina Vuko, PhD) .......... 61 5.1. Demand model and data .............................................................................. 62 5.2. Empirical analysis ......................................................................................... 69 5.3. Results and discussion .................................................................................. 75 i 6. Cigarette price elasticity – analysis of household budget surveys (Slavko Šodan, PhD) ................................................................................... 77 6.1. Economic model and methods ..................................................................... 78 6.2. Sample and data description ........................................................................ 82 6.3. Results and discussion .................................................................................. 85 7. Science - policy dialogue on tobacco taxation issues (Ljerka Markota, PhD) .. 91 7.1. Overview of demand for tobacco products ................................................. 92 7.2. Regulations and taxation of tobacco products ............................................ 93 7.3. Price elasticity – guidelines for policy dialogue ............................................ 95 7.4. Stakeholder analysis ..................................................................................... 95 7.5. Roundtable conclusions and recommendations .......................................... 98 8. Summary and recommendations ............................................................... 101 References ......................................................................................................... 105 Appendix A ........................................................................................................ 113 ii Foreword Smoking prevalence in Croatia remains among the highest in Europe. Comprehensive tobacco control policies that include higher tobacco taxes and prices, clean indoor air laws, and bans on tobacco marketing are effective in both preventing youth from starting to smoke and encouraging smokers to quit. In this monograph, we have collected the results of the research carried out in Croatia within the International Scientific Project Accelerating Progress on Effective Tobacco Tax Policies in Low- and Middle-Income Countries. The project is funded by the University of Illinois at Chicago’s Institute for Health Research and Policy through its partnership with the Bloomberg Philanthropies, and it is the first of this kind in Croatia. The Institute of Economic Sciences from Belgrade, Serbia is coordinating a regional network of researchers. The following partner institutions are taking part in this research: Institute of Economic Sciences (Serbia), Development Solutions Associates - DSA Center (Albania), University of Banja Luka (Bosnia and Herzegovina), Faculty of Economics, Business and Tourism of the University of Split (Croatia), Centre for Political Courage - CPC (Kosovo), Analytica (Macedonia), and Institute for socio-economic analyses - ISEA (Montenegro). The project aims at fostering research and policy dialogue on tax reforms concerning tobacco consumption and formulating clear and achievable policy responses to reduce tobacco consumption in the region. Policy dialogue among all relevant stakeholders on efficient tax policies is an important aspect of creating a national tobacco control policy. The short- term goal of such co-operation is to put tobacco taxation issues on the political agenda, to create a dialogue between researchers and decision- makers, and to develop recommendations that will result in sustainable and systematic policy change. The long-term goal is to create an effective 1 tobacco control policy and to develop a strategic plan to reduce the damage caused by the use of tobacco in Croatia. We hope that the published materials within this book will provide insight and thus a better understanding of tobacco market and tobacco consumption characteristics in Croatia. These findings will hopefully provide opportunities to improve tax policy, primarily by further increasing excise duties on tobacco products, which should ultimately result in increased tax revenues, healthcare savings, and improving the health of the population. Split, December 2018 Editor Professor Željana Aljinović Barać, PhD 2 Executive Summary In 2017 economic situation in Croatia was stable with increased economic activity supported by favorable EU and global economic environment. The Croatian tobacco market is oligopolistic - controlled by few global companies dictating market conditions. Domestic producer Tvornica duhana Rovinj (TDR) was the leading independent cigarette manufacturer in Central Europe with a market leading position in Croatia and a position of scale in Bosnia and Serbia over the decade, until September 2015, when it was acquired from Adris Grupa by British American Tobacco (BAT). After takeover, the BAT became the market leader in Croatia with a share of around 58.5 percent and together with Philip Morris International that held 34.5 percent of market share in 2015, they could significantly affect the market conditions. Smoking and consequently the demand for tobacco products have been slowly declining in popularity in Croatia due to continuously more restrictive tobacco regulations. Croatia became a Party to the WHO Framework Convention on Tobacco Control (WHO FCTC) on October 12, 2008. Furthermore, by joining EU in 2013, Croatia adopted EU regulations so the Directive 2014/40/EU was incorporated in the national acts. Tobacco and related products are covered under several laws and regulations and Croatian government through Ministry of Finance - Customs Administration
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