Indonesia to raise cigarette tax in January

Cigarette tax in Indonesia will be increased by an average of 10 percent starting January 1 next year in a move to control the production and consumption of cigarettes in the country.

Local media quoted Indonesian Finance Minister Sri Mulyani Indrawati as saying her ministry had approved regulations on hiking tax on all types and brands of cigarettes effective January 1, 2017.

“The increase would be deterrent enough but not give a negative impact on employment opportunities in the tobacco industry and at the same time provide sufficient for space for small industries,” she said.

The Indonesian government is targeting to earn Rp150 trillion (RM450 million) in taxes, an increase of 5.7 percent compared to this year.

The most popular cigarette in Indonesia is keretek, a type of cigarette made from a mixture of tobacco, cloves as well as other spices.

The price of keretek is said to be the lowest in the world as a stick of the machine-made cigarette is sold at about 10 sen while a hand-rolled keretek cigarette is sold at about 15 sen a stick.

Factory manufactured white cigarettes are sold at about 15 sen a stick while white hand-made cigarettes cost about 18 sen a stick.

Online media quoted Indonesian Public Administration analyst, Agus Pambagyo as saying the regulations to raise cigarette tax would not affect the cigarette industry even though the prices of cigarettes would remain as the cheapest in the world.

He said the prices of cigarettes should not be so low and in the effort to raise cigarette prices, the government should also take steps to eradicate the sale and production of illicit cigarettes as well as smuggled products.

At the same time, he said an increase in the prices of cigarettes could provide irresponsible parties the opportunity to sell more cheap cigarettes illegally.