Max Excise to Curb Smoking, Cover Health Care Deficit in One Swoop: Academics


JUNE 19, 2017

Jakarta. The government has means at hand to reduce tobacco consumption and at the same time close a gaping universal health insurance budget deficit, without having to consult it with the House of Representatives, say University of Indonesia academics.

For the past few months, the House has been trying to revise Indonesia's tobacco law in a way that, according to anti-tobacco activists, would make smoking even more prevalent in the country where one in three is already addicted to cigarettes.

Abdilllah Ahsan, a researcher of the University of Indonesia's Demographics Institute, said the government should impose the highest tariff on all kinds of cigarettes.

"This is still within the Finance Ministry's domain and we don't need to revise the excise law," Abdilllah said last week.

Currently, the government imposes different tariffs for different kinds of cigarettes, from as low as Rp 80 per unit to Rp 555 per unit.

"This is a legacy from the past when clove cigarettes were still competing with 'white' cigarettes," Abdilllah said, referring to foreign cigarettes that do not contain cloves.

"Now, even clove cigarettes are owned by multinational companies that produce 'white' cigarettes."

Indonesia produced 348 billion cigarettes in 2016. By imposing the highest tariff, Abdilllah said, the government could have collected Rp 189 trillion ($14.2 billion) in cigarette tax alone last year. In comparison, the government reaped Rp 143.5 trillion in excise last year, which also included taxes on alcoholic beverages.

Maxing out the excise is "a triple win," according to Abdilllah, who noted that diseases caused by smoking could be reduced, the overall health of Indonesians improved, and the state's coffers filled.

One of the World's Biggest Smokers

Indonesian Consumer Protection Foundation (YLKI) supports the idea.

YLKI said Indonesia is the third biggest smoker after China and India, with 35 percent of its population — or about 75 million people — being tobacco addicts. Smoking is currently the main cause of non-contagious diseases in the country.

"Sooner or later, the country's health care insurance program will collapse if the government doesn't contain it," YLKI managing director Tulus Abadi said in a statement.

"No health care financing system will be able to cover people who constantly get sick because of cigarettes," he said.

The additional excise collection could be used to close a widening deficit in Indonesia's universal health insurance, or JKN, which reached a whopping Rp 9.7 trillion last year.

The deficit has almost tripled since 2014, when it stood at Rp 3.3 trillion. In 2015, it grew to Rp 5.7 trillion due to higher-than-expected payment claims.

"I reckon the deficit is due to low premiums," said Hasbullah Thabrany, the head of the Center for Health Economics and Policy Studies at the University of Indonesia (CHEPS UI).

People pay premiums from Rp 25,500 to Rp 80,000 a month for the universal insurance, depending on their income. On average, Hasbullah, said Indonesians paid Rp 35,000 a month in 2016.

According to a CHEPS UI estimation, average health care spending per person per month in 2014 was Rp 136,000. The center has yet to complete its study for the subsequent years, but Hasbullah said it "should be bigger."

Tobacco Bill

The House of Representative established a special committee in May to discuss a tobacco bill it initiated at the end of last year. The bill aims to boost tobacco production and distribution to save millions of jobs in the industry.

Vice President Jusuf Kalla said the government in principle opposes the bill, and the Ministry of Health, the Ministry of Trade have been requested to oppose during discussions with the House.

If the bill is enacted, health warnings on cigarette boxes will have only writings instead of gruesome pictures the have today. The bill also stipulates tighter restrictions on the import of cigarettes and requires local manufacturers to absorb most of the local tobacco production, which critics said would trigger cigarette makers to rump up their output.