Indonesia wary that excise hike would hit smoking

In a reversal of the received wisdom on tobacco tax, the Indonesian government has said that it will not be increasing excise on cigarettes because such a rise might make them unaffordable for many people, according to a story in The Jakarta Globe.

The director general of the Finance Ministry’s Directorate General of Customs (DGC), Heru Pambudi, was quoted as saying that care had to be taken in respect of imposing higher tariffs when cigarette production was declining.

If tariffs were raised, some consumers would not be able to afford cigarettes and production would decline even further. A drop in cigarette production was one of three factors that would hurt overall customs and excise revenue this year.

The DGC, which has raised its revenue target from tobacco excise this year despite missing last year’s target, says that for now it will try only to ensure tobacco companies complied with their excise obligations.

The customs office earned Rp112 trillion ($8.41 billion) from tobacco excise in 2014, short of its target of Rp116 trillion. This year, it has raised its target by more than a quarter to Rp142 trillion.