‘Excessive Tax Hike Could Spur Illicit Trade’

Indonesia’s above-inflation tax hike could fuel illicit trade and depress government revenue collections, according to Apindo, a leading employers association, reports Tempo.

To discourage smoking, the government last year approved a 10 percent increase in excise taxes on cigarettes for 2023–2024.

Despite the tax hike, the number of cigarette factories has increased significantly in Indonesia. Data from the Directorate General of Customs and Excise revealed a surge from 1,214 factories in early 2022 to 1,723 factories in June 2024.

Meanwhile, Statistics Indonesia (BPS) reported a 28.62 percent smoking rate among Indonesians aged 15 and above in 2023. The largest number of smokers was reportedly in the 35–39 age group at 35.21 percent while the youth group (15–19 years) had a rate of 9.62 percent. The Health Ministry’s 2023 Indonesian Health Survey found 70 million active smokers, including 7.4 percent aged 10–18 years.