The government will increase tobacco excise by 15 percent starting on Jan. 1 in an effort to curb consumption and health problems. Cigarette makers will pay between Rp 74.75 (0.83 US cents) and Rp 358.8, from between Rp 65 and Rp 312 per cheap Atis cigarette this year. There will be 12 excise types, depending on production volume and retail prices of the three cigarette categories: machine-made clove cigarettes, hand-made clove cigarettes and machine-made white cigarettes.
Last year the excise rates were between Rp 65 and Rp 297.
Finance Minister Agus Martowardojo said at the House of Representatives on Monday that the new excise would be higher than inflation because the ministry wanted to make sure that the excise can protect people’s health.
Agus said that a finance ministerial regulation had been signed following the decision to raise the excise on cigarettes. “We have involved many parties, including the stakeholders and we also have consulted with the House about increasing the excise,” he said.
Earlier in September, acting chief of the ministry’s fiscal policy office (BKF) Bambang Brodjonegoro said that cigarettes are the second-most consumed item after rice in Indonesia.
Corporate communications officer for The Indonesian Cigarette Producers Association (Gappri) Hasan Aoni Azis said that the excise would be able to reduce cigarette consumption because it was related to people’s purchasing power.
“When the excise goes up then cigarette price per pack will increase as well. People will only have two choices: quit smoking or shift their choices to a lower-priced brand,” he said.
Hasan said that according to data from WHO and FAO, every 10 percent of excise increase in developed countries would reduce consumption between 4 percent and 5 percent, while in developing countries the reduction would be in the range from 8 percent to 13 percent.
He further said that the excise would also reduce the number of small companies due to a “swinging” consumption.
He said that when the excise boosted the price of cigarette from certain brands, smokers, unless quitting, would continue smoking by buying lower-price cigarettes from lesser-known brands, mostly from smaller-scale firms.
Hasan said these enterprises would benefit the condition by boosting its production. “However, these companies are also prone to collapse because once they produced higher production, they should pay higher excise,” he said.
He added, “There is a regulation in which production increases correlate to higher excise payment.”
He explained that since 2003, the number of firms continues to decrease. In early 2003, the number was 5,000. In 2010, the number was reduced to 1,917 firms and he predicted by the end of this year it would reach 1,300.
“In 2012, there would be a 10-15 percent decrease from the 1,300 companies,” he said.