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Tobacco Taxes to Increase by 11%

The government has declared a raise in tobacco excise taxes, by approximately 11.19 %, since January 1, 2016, after taking into consideration both the status of the cigarette industry and public health. “The largest tax boost of around 12.96 to 16.47 % will be applied to machine-rolled cigarettes and the smallest boost of 0 to 12 % will put on hand-rolled cigarettes,” stated the Finance Ministry’s director general of taxation Heru Pambudi several days ago as quoted on tempo.co.

Heru explained the government would not raise taxes on hand-rolled cigarettes in the III B group simply because of their sluggish manufacturing rate as compared to machine-produced cigarettes.

Tobacco tax is yet one of the major sources of excise profit. This year the government has established a goal of Rp 139.12 trillion (US$10.29 billion) for tobacco tax earnings. Altogether, the excise profit goal classified by the 2016 state budget is Rp 155.52 trillion. This volume includes Rp 148.86 trillion from tobacco taxes and Rp 171.2 million from alcohol taxes.

Heru has shown his confidence that the government would achieve its targeted cigarette excise profit in spite of a decreasing economy, mostly because of the forthcoming regional elections and the advised tax increases. “At regional election time consumption generally boosts,” he stated.

At the same time, Deputy Coordinating Economic Minister Edy Putra Irawady stated several days ago that in 2020, the government would no longer consider tobacco taxes as a part of the state budget, or the contribution of the tobacco-related industry to occupation.

Edy claimed that by 2020, the government would have prioritized public safeness over the economic effects of the tobacco industry

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