Indonesia’s long-running reliance on tobacco excise increases has failed to significantly curb smoking, according to a National Health Survey, with around 70 million people still using tobacco and prevalence remaining among the highest globally. Despite a 23% tax increase in 2020 and steady annual rises since, cigarette affordability has remained largely unchanged, as income growth has offset price increases, leaving consumers spending roughly the same share of income on cigarettes over the past decade.
Analysts say structural issues are undermining the effectiveness of tax policy, particularly wide price disparities across product categories. Lower-taxed hand-rolled kretek cigarettes continue to provide a cheaper alternative, encouraging smokers to downtrade rather than quit. This dynamic has limited the impact of higher taxes on overall consumption.
Health economists argue that without more aggressive and harmonized tax reforms, excise policy alone will continue to fall short as a deterrent. The findings underscore broader challenges for tobacco control strategies in emerging markets, where affordability and product substitution can blunt the intended impact of fiscal measures.
