Indonesia to raise cigarette prices by more than a third at start of 2020

13 September 2019
Gayatri Suroyo and Maikel Jefriando; Additional reporting by Fanny Potkin; Editing by Susan Fenton

JAKARTA (Reuters) – Indonesia will raise the minimum price of cigarettes by more than a third from January next year, a finance ministry spokesman said on Friday, as part of the government’s efforts to reduce smoking rates.

Nearly 70% of adult men smoke in Indonesia, according to the World Health Organization – one of the highest rates in the world – and tobacco kills 225,720 people each year in the country or 14.7% of all deaths, mostly through cardiovascular diseases, the WHO said in a 2018 report.

The Indonesian government has been raising taxes on tobacco products almost every year since 2014 to cut consumption, but that has not had a significant impact on smoking rates.

From Jan. 1 next year, the government will raise the minimum price of cigarettes across categories by an average of 35% and increase the excise tax on tobacco products by 23%, finance ministry spokesman Nufransa Wira Sakti said.

The largest cigarette companies in Indonesia include HM Sampoerna, Gudang Garam and unlisted Djarum Group.

Sampoerna, Gudang Garam and Djarum did not immediately respond to requests for comment.

Jakarta kept tobacco taxes flat this year, after raising them by 10%-11% per year in the past five years.

Currently, taxes on popular machine-rolled clove cigarettes range from 370 rupiah to 590 rupiah a stick, while the floor retail prices range from 715 rupiah ($0.0512) to 1,120 rupiah a stick.

The rates for filtered cigarettes, popular among younger Indonesians who dubbed them “white cigarettes”, range from 355 rupiah to 625 rupiah a stick, while floor retail prices range from 640 rupiah to 1,130 rupiah a stick.

Rules on tobacco taxes are often controversial in Indonesia, where big tobacco companies often say a decline in sales hurt the livelihood of farmers.

Indonesia aims to collect 172 trillion rupiah ($12.32 billion) of revenue from tobacco excises in 2020, according to government proposals for next year’s state budget which is awaiting parliamentary approval.

(This story corrects para 2 to clarify that 70% of adult men in Indonesia, not 70% of all adults, smoke)