Indonesia: Anti-tobacco groups slam small cigarette excise hike

3 October 2016

The government’s decision to raise cigarette duties will not deter tobacco consumption in the country, public health experts and activists say, as the new price will keep cigarettes affordable for smokers, even with the new excise taxes.

The Finance Ministry announced on Friday that it had issued a regulation to increase excise taxes by an average of 10.54 percent next year for several types of cigarettes. The new increase is lower than the increase set by the government for this year, which reaches 11.33 percent.

The new hike will take effect starting in January next year and will increase the retail price of cigarettes by an average of 12.26 percent.  

The relatively low increase shows that the government is not particularly interested in reducing the prevalence of smoking in the country, said Tuti Soerodjo, a tobacco control special committee chairwoman at the Indonesian Public Health Experts Association (IAKMI).

“They [smokers] can still afford cigarettes, given the minuscule increase in excise tax,” Tuti told The Jakarta Post on Sunday.

The Excise and Tax Law stipulates that excise taxes on cigarettes are meant to control tobacco consumption, which many believe has reached an alarming level in Indonesia.

Indonesia is home to 72 million smokers aged 15 years and over, according to WHO data. The 2013 Basic Health Survey (Riskesdas) revealed that three out of 10 smokers are between 15 and 30 years of age and most start to smoke before they turn 19.

The cost of treating tobacco-related diseases, meanwhile, is currently estimated at Rp 11 trillion per year, or 0.29 percent of the country’s gross domestic product. By contrast, the state capital injection for the Healthcare and Social Security Agency (BPJS Kesehatan) in the planned 2017 state budget amounts to Rp 3.6 trillion.

Tuti said smokers would be discouraged from purchasing cigarettes if the excise tax was higher than the sum of the country’s inflation rate and economic growth.

“The new cigarette duties are only a little bit higher than the two, supposing we have more than 5 percent economic growth and more than 3 percent inflation next year,” Tuti said.

Tuti added that the new excise tax increases were a sign that the government still sided with the tobacco industry. “They [players in the tobacco industry] did not scream at all in response to the new increases.”

According to the new regulation, machine-made white cigarettes will be subject to excise hikes of up to 13.46 percent, while two other types, machine-rolled cigarettes and hand-rolled cigarettes, will be subject to excise tax increases of up to 10.42 percent and 8.6 percent, respectively.

The government believes that higher increases might threaten job security in the tobacco industry and create an illegal market, Finance Minister Sri Mulyani said.

The ideal excise tax increase average should be 20 percent to prevent low-income citizens from buying cigarettes, said Indonesian Consumer Foundation (YLKI) chairman Tulus Abadi.

A recent study by University of Indonesia surveyed 1,000 smokers and found that they would consider quitting smoking if cigarette prices were Rp 50,000 per pack, double the current average price.

With the new excise rates, it is likely that smokers will purchase cheaper cigarettes rather than reduce their consumption, said Komunitas Kretek general secretary Alfa Gumilang.

He said the new increases would only affect a few, such as low-income smokers who spend majority of their income to purchase cigarettes.

“They [low-income smokers] may reduce their expenditures for cigarettes due to the higher price as a result of a rising excise tax,” Alfa told the Post.