Tax hike announced

The government of Indonesia will raise the excise tax on tobacco and tobacco products by 23 percent effective Jan. 1, 2020, reports Tempo. The minimum retail price will be increased by 35 percent.

Finance Minister Sri Mulyani said the tax hike was aimed at reducing cigarette consumption, controlling the industry and maintaining state revenue, which she estimated to reach IDR173 trillion ($12.4 billion) next year.

She added that the government was concerned about the increasing prevalence rate of smokers among women and children from 2.5 percent and 7 percent to 4.8 percent and 9 percent, respectively.

“Therefore, we have to think of how to use this tax to reduce the smoking trend,” the minister remarked.

Indonesian tobacco companies’ shares tumbled following the announcement, according to Morningstar.

Market leaders Sampoerna and Gudang Garam dropped 22 percent each, causing them to lose IDR69.48 trillion and IDR27.68 trillion in market capitalization, respectively.

Both companies suffered their biggest intraday percentage falls in more than 20 years.