Indonesia: Tobacco tax should be used to promote health

Anti-tobacco activists have called on the government to set aside a higher percentage of tobacco taxation to pay for tobacco control and health campaigns.

The activists have said that at present, only a small fraction of taxes paid by the tobacco industry went toward health and tobacco prevention programs.

Abdillah Ahsan, a researcher from the Demography Institute at the University of Indonesia (LDUI), said that the taxes imposed on the sales of cigarette could be used to pay for tobacco control initiates.

“The tax from the sales of cigarettes is dedicated to various programs, some are not even related to health promotion or tobacco control. A portion of the tax in fact is used to support policies that improve tobacco farming,” Abdillah said during a discussion held earlier this week.

Under Law No.39/2007 on levies, tobacco products are goods that are subject to excise tax as they pose health risks to consumers. Under the regulation, 2 percent sales tax on cigarette products goes to tobacco producing areas, while only a fraction of the taxes are dedicated to health promotion and tobacco control.

Under the 2009 finance minister regulation, issued to implement Law No.39/2007 on levies, a percentage of the tobacco tax is dedicated to programs in the health sector, which include the designation of smoke-free areas and smoking sections in public spaces. It also covers the development of healthcare facilities for patients suffering from tobacco-related health problems.

Bungon Ritthiphakdee, director of Southeast Asia Tobacco Control Alliance (SEATCA), said setting aside some of the funds generated by the tobacco tax for tobacco control and health programs was a win-win policy.

“People with healthy lifestyles are more productive to the country. At the same time, healthcare costs covered by the government or families for tobacco-related diseases will be reduced in the long run,” she said.

With such a mechanism, Ritthiphakdee said that the government could no longer front the cost of health risks caused by cigarette smoking.

“We call this concept ‘polluters pay’. It is the industry who sells the deadly products to the consumers, causing harm to the country. So they have to pay […] through taxes,” she said.

Thailand first introduced the concept of tobacco tax for health promotion and tobacco control in 2001. Prior to 2000, 10 million of a of total 65 million people in the country were smokers. More than 50,000 tobacco-related deaths occurred every year. The economic loss from tobacco consumption was estimated at US$1.2 billion
per year.

“With tighter controls on tobacco use, we have a decreased the prevalence of smoking,” said Ritthiphakdee.

High tobacco tax is considered one of the most effective ways to reduce smoking and other tobacco use. The Finance Ministry recently decided to raise the levy on cigarettes by 8.5 percent. Cigarette makers in the country have to pay taxes ranging from Rp 80 to Rp 380 per piece.

Activists doubt that the new tobacco tax will effectively wean the country off its tobacco addiction as the highest rate applied was only 57 percent per piece. The World Health Organization said that the amount should be at least 70 percent.