The government of Indonesia has raised the excise tax tariffs on tobacco. The Finance Ministers Regulation, No.147/PMK.010/2016, was issued in this respect.
In the new policy, the highest tobacco excise duty hike of 13.46 percent was for machine-made white cigarettes (SPM) and 0 percent for category IIIB hand-rolled clove flavored cigarettes (SKT). The average increase was 10.54 percent.
Besides raising the excise tax rates on tobacco, the government also increased the retail prices of cigarettes by about 12.26 percent.
The tobacco tariff rates have been raised to control production, regulate manpower, end sale of illegal cigarettes and enhance revenue in the excise sector.
“The government realizes that cigarette is a commodity harmful to health. Therefore, consumption needs to be limited. The increase in the tobacco tariff is aimed to control cigarette consumption and circulation,” Finance Minister Sri Mulyani told a press conference at the Directorate General of Customs and Excise Office here on Friday.
The minister hoped that the increase in the tobacco customs tax tariff would contribute positively to the governments revenues in the customs sector.
In 2017, the government set a revenue target from the customs sector at Rp149.8 trillion, which is about 10 percent of the total tax revenues.
“Though it has slightly declined, it still contributes significantly. The government and the people should back the policy because if it misses its target, it will affect the state budget, which, in the end, will affect the national development programs,” Minister Sri Mulyani added.
Sri Mulyani stated that the policy was discussed with various stakeholders, including those concerned with health and employment, tobacco farmers, tobacco companies and associations.
Meetings were also held with local governments, foundations and universities to discuss the matter.
Following the meetings and discussions, it was concluded that the excise duty needs to be increased in order to control consumption and production.
However, such an increase must be balanced so that it does not affect job opportunities and survival of small industries.
In the meantime, a youth community group, Smoke Free Agent (SFA), has backed the governments move to raise cigarette prices, arguing that the number of young smokers in Indonesia has been rising at an alarming rate.
“In addition to reducing the number of adult smokers, cigarette price hikes may also discourage new smokers, who are mostly children and adolescents,” Ricki Cahyana of the Anti-Smoking Indonesia Community stated in a press release issued by the SFA on Wednesday.
Ricki noted that on an average, adults started smoking by the age of 16, and 30 percent of Indonesian children began smoking before the age of 10.
Hasna Pradityas, one of the initiators of the SFA, remarked that the tobacco industry is currently aggressively targeting children as potential consumers to replace adult smokers in the future.
“Without young smokers and children, the tobacco industry would become bankrupt when adult smokers no longer exist,” he pointed out.
If the government really raises the price of cigarettes, then it will be like a breath of fresh air for Indonesia.
Prospective new smokers, mostly children, will no longer find it easy to buy high-priced cigarettes.
In the long run, it will help reduce the number of child smokers and make the next generation of Indonesians a golden one, capable of competing at the global level.
“We hope the government will really go ahead with its plan to hike the price of cigarettes, thus reflecting its serious commitment to protecting the health of young people and creating a golden future generation,” Yosef Rabindanata, an SFA activist, observed.