Cigarette Excise Increases: Industry Confused, Consumers Refused

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Jakarta – The government plans to increase the cigarette excise tax next year by 23% starting in early 2020. Besides that, the retail sale price (HJE) will also increase by 35%.

excise duties ilustration by

Related to this, cigarette manufacturers claim to have not received information from the government. They asked the government to pay attention to industry and farmers.

Cigarette industry players also object if the government also simplifies or simplifies the cigarette industry class. Here is the complete news:

This was conveyed by the Legal & External Affairs Director of Bentoel Group, Mercy Francisca Hutahaean in his official statement to AFP.

Foto: Dok. ANTARA FOTO/Adeng Bustomi

“We still hope that there will be a policy from the Government in this matter, namely by still paying attention to the voices of the majority of the industry and of course the farmers,” he said.

He said, the cigarette industry as long as contributing to national exports. Thus, contributing to the economy.

“So far, we have consistently continued to strive to develop the business of the tobacco industry in Indonesia, including contributing to exports, which we believe will have a positive impact on the Indonesian economy,” he explained.

Meanwhile, he claimed not to know in detail the planned increase in excise tariffs. Mercy knows the government’s plan only from the media.

“We have not received details from the regulations relating to the Government’s plan to increase the excise tax rates and HJE cigarettes which will be effective from January 1, 2020. The high increase plan as it has been published in various media is certainly not what we previously expected,” he concluded.

The government has decided to raise cigarette excise tax by 23% and the retail sale price (HJE) by 35% starting January 1, 2020. In addition there are also old plans for the government to simplify or combine cigarette layers.

The Ministry of Finance (MoF) is asked to look holistically or comprehensively related to the simplification plan. Not only in terms of revenue for the central government, but also pay attention to the consequences of derivatives if the policy is taken. Not only from the health element, but also the level of welfare of the wider community along with regional development.

kretek factory
Kretek Factory

The current tax collection system applied by the government is based on the Minister of Finance Regulation No. 156/2018 is an ideal system and is accepted by all economic actors.

“I think BKF needs to review this (Simplification) policy by looking at many aspects, not only in the industry but starting from the upstream, labor, local original income as well as local government. Around 70% of the local government is very dependent on sending from the central government. One of them is tobacco excise sharing fund or DBHCT. If there is a change in excise tax policy, there will be a reduction in excise revenue because there is a change in the withdrawal or simplification system, it can be dangerous for the region. Development and regions can be neglected, “said Professor of the Faculty Economics and Business Universitas Brawijaya Malang, Prof. Dr. Candra Fajri Ananda.

According to him the excise withdrawal system consisting of 10 tiers based on PMK 156/2018 is already quite ideal. Through this system, the target of excise revenue is reached.

Until July 2019, the tobacco excise tax target of Rp 159 trillion had been reached Rp 130 trillion. He also believes that the 2020 target of around Rp 170 trillion will be achieved.

“So if you can contribute that much, what else can you do? This is already close to 100%, why is the target, what’s the problem? Why is a good system, the target has been reached, why is it disturbed,” he added.

Candra said she was worried, if the excise withdrawal system was changed through a simplification mechanism, from 10 tiers to 5 tiers, it would have a bad impact. Because originally a small cigarette factory pays taxes or small excise according to the amount of production, grouped into groups that are above it, so it must pay a tax that is greater than it should be.

That way, it will kill the kretek cigarette industry, especially those managed by entrepreneurs or small manufacturers. If the small and medium cigarette factory factories die, it will reduce the state revenue from tobacco excise tax.

Not only that, according to Candra will also close employment opportunities for people in the area, reducing tobacco excise revenue sharing funds for local governments and shut down the economy of local communities that have been dependent on the cigarette industry.

“Do not let President Joko Widodo, who has decided a very good policy to reject simplification through PMIK 156/2018, because the Ministry of Finance urges it to approve the simplification, instead gets protests and demonstrations from clove and tobacco farmers and cigarette workers in various regions. “The Ministry of Finance and BKF must support the president’s policies which are already good,” he stressed.

Sources :

Yudha Pratama

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