Indonesia’s government confirmed it will not raise tobacco excise rates in 2026, opting instead to restructure the cigarette excise system by adding new tax tiers. Finance Minister Purbaya Yudhi Sadewa said the move is intended to bring machine-rolled clove cigarettes (SKM) that have effectively operated outside the current tax structure into the excise system. The government expects the changes to be implemented this year, arguing that revising the tax structure is more appropriate than raising excise rates amid weakening consumer purchasing power and a shift toward lower-priced cigarettes.
Tag: Indonesia
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Indonesian Tobacco Groups Oppose New Controls
Indonesian tobacco industry groups are urging President Prabowo Subianto to delay implementing regulations under Government Regulation No. 28/2024, warning that proposed measures such as plain packaging, limits on tar and nicotine, and restrictions on additives could lead to job losses, lower sales, and increased illicit trade. The Indonesian Employers Association (Apindo) said it supports measures including a ban on underage tobacco sales, raising the minimum purchase age to 21, and requiring health warnings to cover 50% of packaging, but argued that standardized packaging for cigarettes and e-cigarettes would undermine legitimate businesses and reduce government excise revenue.
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Indonesia Considering Vape Ban Over Drug Abuse
Indonesia is considering a total ban on e-cigarettes if a government review concludes they pose greater public health risks and continue to be used as a vehicle for illicit drugs, President Prabowo Subianto said. Speaking during the International Day Against Drug Abuse, the president directed multiple government agencies to develop stricter regulations governing vape imports, distribution, and sales, while warning authorities not to hesitate to impose a nationwide ban if warranted.
The proposed review is driven by concerns that e-cigarettes are increasingly being used to consume narcotics. Prabowo cited studies claiming that 39.5% of vape users had used e-liquids containing recreational drugs, including cannabis, MDMA, and cocaine, arguing that drug syndicates are exploiting vaping devices to distribute illicit substances. He called for stronger oversight and a comprehensive policy response to protect young people from drug abuse.
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Indonesia Adding, Not Subtracting Tobacco Tax Tiers
Indonesia’s government plans to expand the country’s tobacco excise tax structure with additional tax tiers this year, according to Finance Minister Purbaya Yudhi Sadewa. The proposal remains under discussion with the House of Representatives, but the minister said implementation would proceed after budget deliberations are completed. The government has said the additional tiers are intended to reduce illicit cigarette circulation and increase state revenue.
The plan has faced criticism from public health and civil society groups, which argue that adding more tiers to Indonesia’s already complex tobacco tax system may not effectively address illegal cigarette sales. Indonesia currently has eight excise tax groups covering machine-made and hand-rolled kretek cigarettes, and industry observers have called for simplification rather than expansion. Supporters of reforming the structure say a more balanced approach is needed to limit illicit trade while maintaining government revenue from the legal tobacco market.
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Report:Tax-Free Cigarettes Fuel Illicit Trade Across Indonesia
Indonesia’s tax-free cigarette regime in the Batam, Bintan, and Karimun (BBK) free trade zone is fueling large-scale cigarette smuggling into the country’s customs area, according to observers and enforcement officials. Cigarette manufacturers operating within the BBK are exempt from tobacco excise and value-added tax provided their products are sold within the zone, but authorities say some producers and traders exploit the system by illegally transporting untaxed cigarettes to other parts of Indonesia where tobacco products are subject to excise duties.
In May, the Batam Customs and Excise Office recorded 11 enforcement actions involving the seizure of 1.3 million illegal cigarettes among 54 smuggling cases. However, experts believe the seizures represent only a fraction of the illicit trade. Suyono Saputra, an economics lecturer at Batam International University, said the loophole differs from traditional illicit cigarette cases elsewhere in Indonesia because the products are legally manufactured and sold within the free trade zone, but become illegal when diverted to the domestic market. He noted that producers can earn substantial profits by smuggling untaxed cigarettes out of Batam, highlighting the challenge authorities face in balancing the benefits of the free trade zone with efforts to curb tax evasion and protect government revenue.
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Man Arrested in Indonesia for Running Labubu Vape Ring
Authorities in Indonesia arrested a Singaporean national in Medan, Indonesia, for allegedly operating an illicit vape production and distribution network that generated an estimated 10 billion rupiah ($565,000) in profits since 2025. Police said the suspect coordinated production of vape products packaged with Labubu branding from Thailand, supplied raw materials from China, and used cryptocurrency transactions to conceal financial flows. A raid on the operation’s production site in Medan resulted in the seizure of 862 vape cartridge tubes, dozens of vape liquid bottles, and more than 10,500 branded vape packages. One Indonesian accomplice was arrested, while a third suspect remains at large.
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Indonesia Customs Seizes 8M Illegal Cigarettes
Indonesia Customs and police are investigating a smuggling network after seizing 8.3 million illegal cigarettes at the Merak–Bakauheni ferry crossing on June 11, preventing an estimated Rp7.9 billion ($442,000) in state losses. The shipment, valued at Rp12.68 billion ($710,000), included OK BOLD and imported Double Happiness cigarettes concealed under livestock feed on a truck traveling from Java to Sumatra.
Authorities arrested the truck driver, who has been charged under Indonesia’s Excise Law, and say he has links to prior similar deliveries. Investigators are now working to identify the wider ownership, financing, and supply network behind the operation.
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Indonesia Health Pushing for Plain Packaging
Indonesia’s Health Ministry is drafting a new regulation that would require plain packaging for tobacco products and electronic cigarettes in an effort to reduce their appeal to young people and curb smoking rates, The Jakarta Post reported. The proposed rule would standardize pack colors and design while retaining brand names and mandatory pictorial health warnings, and is intended to prevent cigarette packaging from serving as a marketing tool.
Health officials say the measure is designed to shift consumer attention toward warning labels and align Indonesia with countries such as Australia, Canada, and Singapore, which have implemented similar policies. The proposal has been welcomed by public health advocates as a tobacco control measure, while drawing criticism from business and consumer groups who argue it could affect branding and market competition.
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Indonesia Stepping Up Vape Surveillance
Indonesia’s National Food and Drug Monitoring Agency (BPOM) is set to gain oversight of vape distribution nationwide, working alongside the National Narcotics Agency (BNN) following reports of drug-laced e-liquids in the market. BPOM said it will develop technical regulations under the country’s recent health laws to determine which vape products are permitted and which will face sanctions, with decisions guided by scientific assessment.
While BNN has proposed a total ban on e-cigarettes to combat narcotics risks, BPOM signaled a more targeted approach, focusing on stricter control of illegal products lacking excise stamps rather than blanket prohibition. Authorities noted that illicit vapes are the primary source of drug contamination.
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Indonesian Groups Reject Tobacco Tier Tax Proposal
A coalition of Indonesian civil society groups rejected a government proposal to expand the country’s tobacco excise system by adding a new tariff tier, arguing it could undermine public health objectives and increase corruption risks. The Coalition Save Our Surroundings (SOS), which includes CISDI, Seknas FITRA, and Indonesia Corruption Watch, said the plan contradicts the primary purpose of excise policy of controlling consumption, and instead prioritizes revenue generation. Officials proposed adding a ninth tier to the existing structure to encourage illegal producers to enter the formal market, with potential implementation as early as May 2026.
Critics argue the move could complicate the system and enable “downtrading,” where consumers shift to cheaper products, while also creating opportunities for manipulation and weak enforcement. CISDI recommended simplifying the current structure rather than expanding it, and ICW warned that additional tiers could open new avenues for corruption through product misclassification. Government officials maintain the policy could help increase revenue and curb illicit trade, but civil society groups say it does not address underlying enforcement challenges.