One of 3 persons in Latvia is a smoker. Smoking has been proved to be linked to different cancer, cardiovascular and respiratory diseases. The overall purpose of the study addresses smoking as a cost-benefit subject in Latvian state economy. A model to perform evidence-based cost-benefit analysis (CBA) was developed highlighting direct and indirect costs borne by the state, smokers and second-hand smokers. The paper envisages the approach to building the model. As the first study on economic impact of smoking in Latvia, the CBA results demonstrate substantial excess of financial benefits from smoking citizens in Latvia. Authors discuss the smoking attributable fraction (SAF) eligibility and needs in data to discover the full impact of smoking on health and non-health aspects.