The Effective Spirits’ Taxation Policy across Regions in Montenegro

  • Gordana Radojevic University of Donja Gorica, Faculty of International Economics, Finance and Business
  • Mirjana Čizmović Mediterranean University, Faculty of Economics and Business
  • Ana Mugoša University of Montenegro, Faculty of Economics
  • Tanja Laković University of Montenegro, Faculty of Economics
Keywords: taxation policy, HBS, public revenues, consumption, Montenegro


This study aims to test the impact of taxation policy on households’ spirits consumption on a regional level. To asses regional differences in spirits use and prevalence changes, due to price and income increase, we applied Two-part methodology on Household Budget Survey data. Using estimates of prevalence and conditional elasticity, we were capable of simulating the effects of price changes on consumption and public revenues. The results confirmed the positive impact of effective taxation policy – consumption decreases, and public revenues increase with evident regional differences. The paper contributes to the research of the consumption sensitivity to price and income changes, which was, until now, not empirically tested in Montenegro.


Araya, D. & Paraje, G. (2018) The impact of prices on alcoholic beverage consumption in Chile, PLoS ONE, 13(10), e0205932,

Carpenter, C. (2004) How do zero tolerance drunk driving laws work?,Journal of Health Economics, 23(1), pp. 61–83.

Chaloupka, F. J., Powell, L. M. & Warner, K. E. (2019) The Use of Excise Taxes to Reduce Tobacco, Alcohol, and Sugary Beverage Consumption, Annual Review of Public Health, 40, pp. 187-201.

Daley, J. I., Stahre, M. A., Chaloupka, F. J. & Naimi, T. S. (2012) The impact of a 25-cent-per-drink alcohol tax increase, American Journal of Preventive Medicine, 42(4), p. 382–389,

Đurišić, T., Golubović, L. & Mugoša, B. (2017) Istraživanje o kvalitetu života, životnim stilovima i zdravstvenim rizicima stanovnika Crne Gore: Nacionalni izvještaj istraživanja (Podgorica: Institut za javno zdravlje Crne Gore i Monstat), available at: (30 May 2019).

European Union (1992) Council Directive 92/83/EEC, Official Journal L 316 , 31/10/1992 P. 0021 – 0027, available at: (30 May 2019).

European Union Committee (2005) EU alcohol strategy, available at: (29 May 2019).

Goernment of Montenegro, Ministry of Finance (2017) Fiscal Strategy of Montenegro by 2017-2020 (Podgorica: Government of Montenegro, Ministry of Finance), available at: (25 May 2019).

Fogarty, J. (2010) The Demand for Beer, Wine and Spirits: A Survey of the Literature, Journal of Economic Surveys, 24(3), pp. 428-478,

Gallet, A. C. (2007) The demand for alcohol: a meta-analysis of elasticities, Australian Journal of Agricultural and Resource Economics, 51(2), pp. 121–35,

Giang, K. B., Van Minh, H. & Allebeck, P. (2013) Alcohol consumption and household expenditure on alcohol in a rural district in Vietnam, Global Health Action, 6(6), pp. 1-8;

Helasoja, V., Lahelma, E., Prättälä, R., Petkeviciene, J., Pudule, I. & Tekkel, M. (2007) The sociodemographic patterning of drinking and binge drinking in Estonia, Latvia, Lithuania and Finland, 1994-2002, BMC Public Health, 7,

Huckle T., You R. Q. & Casswell S. (2010) Socio-economic status predicts drinking patterns but not alcohol-related consequences independently, Addiction, 105, pp. 1192–202,

Kostova, D, Ross, H., Blecher, E. & Markowitz, S. (2011) Is youth smoking responsive to cigarette prices? Evidence from low- and middle-income countries, Tobacco Control, 20(6), pp. 419–424.

Korotayev, A., Khaltourina, D., Meshcherina, K. & Zamiatnina, E. (2018) Distilled Spirits Overconsumption as the Most Important Factor of Excessive Adult Male Mortality in Europe, Alcohol and Alcoholism, 53(6), pp. 742-752,

Law on Amendments to the Law on Value Added Tax, Official Gazette of Montenegro, No. 50/17.

Law on Excises Tax, Official Gazette of Republic Montenegro 065/01, 012/02, 076/05 and Official Gazette of Montenegro 076/08, 050/09, 078/10, 040/11, 061/11, 028/12, 038/13, 045/14 008/15, 001/17, 50/17, 55/18.

Law on Protection from Domestic Violence, Official Gazette of Montenegro No 46/10.

Law on Road Transport Safety, Official Gazette of Montenegro No 33/12, 58/14, 14/17).

Law on spirits drink, (Official Gazette of Montenegro No 53/16).

Law on Tourism and Hospitality, Official Gazette of Montenegro, No. 61/10.

Law on Amendments to the Law on Value Added Tax, Official Gazette of Montenegro, No. 50/17.

Liang L. & Huang J. (2008) Go out or stay in? The effects of zero tolerance laws on alcohol use and drinking and driving patterns among college students, Health Economics, 17(11), pp. 1261–1275,

Mann, R. E., Smart, R. G. & Govoni, R. (2003) The epidemiology of alcoholic liver disease, Alcohol Research & Health, 27(3), pp. 209-219.

Manning, W. G. & Mullahy, J. (2001) Estimating log models: to transform or not to transform, Journal of Health Economic, 20(4), pp. 461-494.

Ministry of Health (2014, 2017) Action Plan on Food Safety in Montenegro 2010-2014 and 2017-2018 (Podgorica: Ministry of Health Montenegro), available at: and (May 30, 2019)

Ministry of Health (2012) The National Strategy for the Prevention of Harmful Use of Alcohol and Alcohol Caused Syndromes in Montenegro 2013-2020 (Podgorica: Ministry of Health), available at: (May, 30 2019).

Nelson, J. P. (2013) Robust Demand Elasticities for Wine and Distilled Spirits: Meta-Analysis with Corrections for Outliers and Publication Bias, Journal of Wine Economics, 8(3), pp.294–317,

Nelson, J. P. (2013a) Meta-analysis of alcohol price and income elasticities – with corrections for publication bias, Health Economics Review, 3(17), pp.1-10,

Pryce, R., Hollingsworth, B. & Walker, I. (2019) Alcohol quantity and quality price elasticities: quantile regression estimates, The European Journal of Health Economics, 20(3), pp. 439-454,

Rabinovich, L., Brutscher, F. B., de Vries, H., Tiessen, J., Clift, J. & Reding, A. (2009) The affordability of alcoholic beverages in the European Union: Understanding the link between alcohol affordability, consumption and harms (Santa Monica: RAND Europa).

Sornpaisarn, B., Shield, K., Cohen, J., Schwartz, R. & Rehm, J. (2013) Elasticity alcohol consumption, alcohol-related harms, and drinking initiation in low-and middle-income countries: a systematic review and meta-analysis. The International Journal of Alcohol and Drug Research, 2, pp. 45-58,

Statistical Office of Montenegro – MONSTAT, available online: (May 25, 2019).

Szűcs, S., Sárváry, A., McKee, M. & Ádány, R. (2005) Could the high level of cirrhosis in Central and Eastern Europe be due partly to the quality of alcohol consumed? An exploratory investigation, Addiction, 100, pp. 536-542;

Tauras, J. (2005) An Empirical Analysis of Adult Cigarette Demand, Eastern Economic Journal, 31(3), pp. 361-375.

Tian, G. & Liu, F. (2011) Is the Demand for Alcoholic Beverages in Developing Countries Sensitive to Price? Evidence from China, International Journal of Environmental Research and Public Health, 8(6), pp. 2124-213,

Wagenaar, A. C, O’Malley, P. M. & LaFond C. (2001) Lowered legal blood alcohol limits for young drivers: Effects on drinking, driving, and driving-after-drinking behaviours in 30 states, American Journal of Public Health. 91(5), pp. 801–804.

Wagenaar, A. C. & Toomey, T. L. (2002) Effects of minimum drinking age laws: Review and analyses of the literature from 1960 to 2000, Journal of Studies on Alcohol, S14, pp. 206–225.

Wagenaar, C. A., Salois J. M. & Komro, A. K. (2009) Effects of beverage alcohol price and tax levels on drinking: meta –analysis of 1003 estimates from 112 studies, Addiction, 104, pp.179-190,

Wood, S & Bellis, M. (2017) Socio-economic inequalities in alcohol consumption and harm: Evidence for effective interventions and policy across EU countries, Health Equity Pilot Project (HEPP) 2015-C4-032-SI2.724119 (Brussels: European Comission).

World Health Organization (2018) Global Status Report on Alcohol and Health (Geneva: World Health Organization).

Xu, X. & Chaloupka, F. J. (2011) The Effects of price on alcohol use and its consequences, Alcohol Research & Health, 34(2), pp. 236-245.