Government Gives In to Big Tobacco, Halves Planned Excise Hike

Buruh beraktivitas di pabrik rokok Gudang Garam, kediri, Jawa Timur. GA Photo/Mohammad Defrizal
Buruh beraktivitas di pabrik rokok Gudang Garam, kediri, Jawa Timur. GA Photo/Mohammad Defrizal

Jakarta. The Indonesian government has announced an average 11 percent excise hike for tobacco products next year, less than half of the 23 percent increase it had been expected to impose in order to discourage smoking and boost state revenue.

The annual excise hike has since 2010 been around the 11 percent mark, but the administration of President Joko Widodo had this time around toyed prominently with the idea of a much bigger increase for 2016 as it looked to bolster flagging state income.

“We impose excise [on a product] not purely for the sake of revenue, [but] also to control its consumption and distribution,” Heru Pambudi, the Finance Ministry’s director general of customs and excise, said on Tuesday when announcing the new increase.

The government has also opted not to increase the excise for hand-rolled cigarettes produced by small companies, saying it wants to support labor-intensive industries. Meanwhile, machine-rolled “white” cigarettes, defined as those not containing cloves in the tobacco mix, will be subjected to the highest excise rate, “but it will not reach 20 percent,” Heru said.

The announcement comes just over a week after President Joko oversaw the signing of a $2 billion investment deal by US tobacco giant Philip Morris International, which has a 98 percent stake in Jakarta-listed H.M. Sampoerna, Indonesia’s biggest cigarette company.

In Tuesday’s announcement, the government also unveiled plans to impose new taxes on sugar-sweetened beverages, including soda, syrup, carbonated beverages and energy drinks, in order to curb consumption, but did not give a time frame for when such taxes would take effect.

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