JAKARTA, KOMPAS.com – The price of cigarettes in Indonesia is expected to go up following the government’s decision to increase the excise tax on tobacco products by 12 percent next year, the country’s Finance Minister confirmed.
Sri Mulyani Indrawati said that the average increase in cigarette excise rates is 12 percent or down 0.5 percent from 12.5 in the previous year.
“The new excise tax will take effect in January. Mr. President [Joko Widodo] has asked us to immediately complete the process so that it will be implemented on January 1,” Sri Mulyani told a press conference on Monday, December 13.
Also read: Excise Tax Hiked on Tobacco in Indonesia
The former World Bank managing director said the decision to increase the tariff was based on some aspects, from reducing cigarette consumption, to the fate of workers in cigarette factories and the distribution of illegal cigarettes.
She also hoped that the increase of the excise tax could reach the medium-term national development plan target of reducing the prevalence rate in teenagers aged 10-18 to 8.83 percent from 8.7 percent by 2024.
The increase in the tariff will contribute to cutting the cigarettes production by three percent from 320.1 billion sticks to 310.4 billion sticks. The price index for cigarettes has also increased to 13.77 percent from 12.7 percent, with a target of state budget revenues to reach 193.5 trillion rupiahs ($13.5 billion).
“The prevalence of tobacco use among adolescents has decreased and the number is getting closer to the target set in the RPJMN at 8.7 percent, while the number of the workforce has the potential to decrease by 457-990 people,” said Sri Mulyani.
On the other hand, her party also takes into account the fate of workers in the cigarette factories. For this reason, the tariff for the hand-rolled clove cigarette industry only increased 4.5 percent.