In Rejecting Excise Hike, Govt Says It Doesn’t Want to Price Cigarettes Out of Reach of Public

Under a House proposal, kretek cigarettes would hold as much cultural importance as ancient temples, archaeological sites, traditional arts and dances, and local cuisines. (JG Photo/Rezza Estily)

By : Jakarta Globe | on 1:21 PM July 14, 2015
Category : News, Business, Commodities, Health

Jakarta. The Indonesian government’s main argument against raising the excise level for tobacco is that it will make cigarettes unaffordable for many Indonesians.

The Finance Ministry’s Directorate General of Customs and Excise, which has raised its revenue target from the tobacco excise this year despite missing last year’s target, says that for now it will only try to ensure tobacco companies comply with their excise obligations.

Heru Pambudi, the director general, said his office was wary about raising the tobacco excise because it would curb cigarette consumption – an attitude in keeping with the Indonesian government’s refusal to acknowledge, in deed if not in rhetoric, the health dangers of smoking.

“We have to be careful about imposing a [higher] tariff when cigarette production is declining,” he said as quoted by

“Then consumers won’t be able to afford [cigarettes]. Then [production] will fall even more, and this is what we have to look out for, because cigarette production is now experiencing a declining trend.”

The customs office raked in Rp 112 trillion ($8.41 billion) from the tobacco excise in 2014, short of its target of Rp 116 trillion. This year, it has raised its target by more than a quarter, to Rp 142 trillion – although without an excise hike, last instated at the start of 2015, it appears unlikely to meet the target.

Heru said a drop in cigarette production was one of three factors that would hurt overall customs and excise revenue this year, targeted at Rp 195 trillion. The others include a Finance Ministry regulation barring transactions begun this year and concluding next year from being booked as 2015 revenue; and a controversial Trade Ministry prohibition on sales of alcoholic beverages at minimarts.

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