The Serbian government has increased excise duties on fuel, alcoholic beverages, coffee, e-cigarette liquids, nicotine pouches, tobacco products, natural gas for final consumption and compressed natural gas starting from February 1st. This increase is part of the usual adjustment of excise duties, which typically occur in February or May to align with last year’s inflation. The inflation rate in Serbia at the end of 2024 was 4.3 percent, according to Danas.
Experts tell Danas that this excise increase will contribute to further price hikes for excise goods and will put additional pressure on the household budgets of average Serbian families.
The biggest beneficiary, they add, will be the state budget, which will use the additional revenue to finance infrastructure projects, including roads, facilities for the “EXPO” exhibition, and other planned initiatives.
What are the new excise rates?
According to the data from the Official Gazette, the excise on leaded gasoline has increased from 71.47 to 74.54 dinars per liter. The excise on unleaded gasoline is now 70.11 dinars per liter, up from 67.22 dinars. The excise on gas oils has risen from 69.12 to 72.09 dinars per liter, while the excise on kerosene increased from 80.58 to 84.04 dinars per kilogram. The excise on liquefied petroleum gas went up from 52.49 to 54.75 dinars per kilogram, and the excise on biofuels and bio-liquids increased from 62.54 to 65.23 dinars per liter.
For alcoholic beverages, the excise on strong alcohol has risen from 53,746.20 to 56,057.29 dinars, on low-alcohol drinks from 26.89 to 28.05 dinars per liter, and on beer from 30.72 to 32.04 dinars per liter.
The excise on unroasted coffee is now 112.71 dinars per kilogram, up from 108.06 dinars, while the excise on roasted coffee has increased from 135.07 to 140.88 dinars per kilogram.
The excise on nicotine pouches has risen from 4,842 to 5,050.21 dinars per kilogram. The excise on imported cigarettes and domestically produced cigarettes has been set at 103.65 dinars per pack since January 1st and will increase to 105.40 dinars per pack starting July 1st. The new excise on natural gas for vehicle fuel is 1,231.32 dinars per megawatt-hour, while the excise for heating is 71.04 dinars per megawatt-hour. These were previously set at 1,180.59 and 68.11 dinars per megawatt-hour, respectively.
For the first time, since February 1st, excise duties have been introduced on compressed natural gas, with a rate of 1,231.36 dinars per megawatt-hour.
“Every expense increases the price of goods”
When asked if the increase in excises will lead to higher prices for these goods, Professor Ljubodrag Savić from the Faculty of Economics told Danas that any increase in costs, including excise duties, must, to some extent, increase the prices of goods. “There is no doubt that any increase in prices, regardless of the source, whether influenced by the government through excise hikes, sales taxes, or by retailers or producers due to increased costs, will affect the final price,” said Savić.
He explained that when the government adopts the budget, it evaluates the required funds for regular expenditures, such as pensions and salaries in the public sector, and for financing infrastructure projects.
“When there is high investment activity, for example, when roads are being built or the EXPO is taking place, the government can increase its revenue by raising excises or taxes to fund the construction,” Savić noted. However, he warned that the government must carefully balance investment in infrastructure projects with ensuring that the increase in excises and taxes does not harm the standard of living for citizens.
“It is unlikely that a retailer will reduce its margin to absorb the excise increase,” Savić pointed out, adding that retailers, along with the government, should ensure that prices are not raised beyond the increase in excise duties.
“The problem in our country is that we have dominant retailers who can make agreements, as has been established, because there is no competitive market where they fight for consumers. One way to compete is by lowering prices. When that is missing, when there is no market competition but agreements or follow-the-leader behavior by smaller chains, we end up with high prices in stores,” explained Savić.
When asked if another excise increase could happen in November, Savić said it is difficult to predict but doesn’t believe the government will rely on such measures to fund the budget. “The government must be cautious, especially due to the complex circumstances we face. There are political demands, and when you make economic decisions that significantly impact the standard of living of citizens, retailers, and producers, it becomes another reason for dissatisfaction,” Savić said.
He is confident that the government will not raise excises again this year, but will instead resort to borrowing for planned investments.
Economist Saša Đogović also believes there is no doubt that the excise increase will lead to higher prices for all excise goods.
“It should be noted that coffee prices have already risen due to higher market prices caused by unfavorable weather conditions that have reduced global coffee supply. This has further raised coffee prices in Serbia, and the excise increase will add to the burden,” Đogović added.
He stated that the budget will benefit from this increase, not only due to excises on coffee, but also from excises on fuel, as this is the main driver of budget revenue.
