The Indonesian government will raise tobacco excise tax in 2020 above 10 percent in the effort to generate state revenue - Photo: Privacy

JAKARTA (TheInsiderStories) – The Indonesian government will raise tobacco excise tax in 2020 above 10 percent in the effort to generate state revenue. The increase in cigarette excise tax certainly has an impact on the rise in the price of Indonesia’s famously low cigarettes.

The Customs and Excise Directorate said Tuesday (09/3) that the new figure, which has not yet been determined, would certainly be above 10 percent.

“(The target for tobacco contribution to state revenue) has been set at 9 percent (for 2020), up from the previous target of 8.2 percent,” said Director of Customs and Excise Heru Prambudi as quoted by local media CNBC Indonesia.

The government and parliament previously agreed to increase revenue from tobacco excise to 9 percent by 2020. In 2018, tobacco excise contributed Rp153 trillion (US$10.77 billion) to the state treasury, which is by far the largest source of tax revenue for the country.

This year, as of August, tobacco excise tax contributed Rp77.7 trillion to state revenues and was on track to meet the Rp158.9 trillion targets even though there was no increase in tobacco excise tax.

In 2018, a survey showed that a large majority of Indonesians supported the increase in cigarette prices through increases in excise due to health reasons and to fight poverty. However, tobacco excise tax for tobacco products remained 10.9 percent for clove cigarettes, 13.5 percent for tobacco cigarettes and 7.3 percent for handmade cigarettes.

There are also plans to simplify the category of tobacco products for customs purposes, but it is not yet known whether the policy will be implemented in 2020.

Indonesia has some of the highest smoking rates in the world, with one main factor being the very low price of cigarettes. At present, the average price of a pack of cigarettes in Indonesia is around Rp17,000.

A study conducted by the School of Strategic Studies and the Global Center for the Study of National Assurance at the University of Indonesia said that 33.03 percent of youth aged 18-24 were still active smokers, followed by 39 years of age by 41.75 percent. While the most active smokers are at the age of 25-38 years with a percentage of 44.75 percent.

The study was conducted on 1-31 May 2018 of 1,000 respondents, both passive and active smokers.

The Indonesian government has often justified loose tobacco control policies in the country (considered the weakest in the world) by arguing that tighter regulations will adversely affect poor tobacco farmers in the country (although they rarely mention the impact on the main country). In fact, tobacco company owners often sit on top of the list of the richest people in Indonesia.

The government also said that the decrease in cigarette demand would negatively impact a large amount of revenue received by the government in the form of tobacco excise.

US$1=Rp14,200

Written by Marcel Gual, Email: theinsiderstories@gmail.com