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Tag: Indonesia

  • Indonesia Offers Amnesty to Bring Illicit Tobacco Makers into Fold

    Indonesia Offers Amnesty to Bring Illicit Tobacco Makers into Fold

    Indonesia’s government dropped plans to raise tobacco excise taxes and is instead offering amnesty to illegal cigarette manufacturers, signaling a major policy shift away from years of punitive enforcement. Finance Minister Purbaya Yudhi Sadewa said the new strategy aims to bring unregistered producers into the formal economy, where their output can be monitored and taxed. The move comes as the government acknowledges that repeated excise hikes and raids under the previous “Gempur Rokok Ilegal” campaign failed to meaningfully reduce demand, while pushing small manufacturers underground.

    The policy rethink reflects a more pragmatic response to weak purchasing power and slow job creation, with officials noting that tobacco remains Indonesia’s single largest source of excise revenue and a vital employer across the supply chain—from farmers to factory workers and small retailers. Purbaya emphasized that the industry’s economic role must be balanced with health goals, warning that overregulation during a fragile labor market could trigger widespread job losses.

    By formalizing more players in the industry, the government hopes to expand its tax base, stabilize employment, and strengthen oversight—marking a strategic pivot from symbolic crackdowns toward sustainable regulation and fiscal recovery.

  • Indonesian Cigarette Industry Shifting Toward Exports

    Indonesian Cigarette Industry Shifting Toward Exports

    Indonesia’s white cigarette manufacturers are increasingly turning to exports to sustain operations as domestic demand softens under the weight of excise hikes and weakened purchasing power, industry officials say. According to Benny Wachjudi, chairman of the Indonesian White Cigarette Entrepreneurs Association (Gaprindo), many domestic consumers are shifting to cheaper illicit products, forcing legal producers to allocate up to 30% of output for export to keep machines running and avoid layoffs. Despite regulatory risks abroad, cigarette exports rose more than 20% in the past three years, reaching $1.9 billion in 2024, Gaprindo said.

    Indonesia ranks as the world’s fourth-largest tobacco exporter with a 6.08% global share, driven largely by sales to ASEAN markets led by the Philippines, according to the Indonesia Business Post. Deputy Industry Minister Faisol Riza stressed that exports are vital for sustaining nearly 6 million domestic jobs and maintaining foreign exchange contributions.

  • Posturing Continues as Indonesia Considers Scrapping Tobacco Excise Hike

    Posturing Continues as Indonesia Considers Scrapping Tobacco Excise Hike

    News that Indonesia’s Finance Ministry is considering canceling next year’s planned cigarette excise increase following consultations with the tobacco industry has drawn sharp backlash from health groups, academics, and child advocates, who warn it threatens public health and undermines anti-smoking efforts. Critics urge the government to instead pursue higher annual increases—at least 25%—along with reforms to simplify excise tiers, narrow tariff gaps, and reduce cigarette affordability.

    Last week, citing the current 57% rate as the legal tax ceiling under Law No. 39/2007, Finance Minister Purbaya Yudhi Sadewa said cleaning up the illegal tobacco market and protecting jobs was more prudent. Industry players agreed, arguing that further tax hikes would strain manufacturers, farmers, and workers.

  • Indonesia’s Tobacco Excise Policy is Public Health Puzzle

    Indonesia’s Tobacco Excise Policy is Public Health Puzzle

    Indonesia’s tobacco excise system is generating record revenue but struggling to curb smoking, highlighting a policy at odds with itself, wrote Hafiz Arfyanto for The Jakarta Post. The government employs a complex nine-tier excise structure designed to balance four national goals: reduce cigarette consumption, maximize revenue, protect tobacco industry jobs, and combat the illegal cigarette trade. While well-intentioned, this multilayered approach has led to unintended consequences, undermining health objectives and limiting revenue growth, he said.

    Last year, tobacco excise brought in Rp 215.3 trillion ($12.9 billion), accounting for nearly 96% of total excise revenue, yet the country still has one of the highest numbers of smokers worldwide. A major challenge is “downtrading,” where smokers switch from premium brands to cheaper cigarettes in lower excise tiers instead of quitting. This behavior keeps consumption high despite higher prices and creates wide price gaps between products, weakening the excise system’s ability to improve public health.

  • Indonesia Working Against Illegal Cigarettes

    Indonesia Working Against Illegal Cigarettes

    The Indonesian government is preparing a new regulation to curb the spread of illegal cigarettes, particularly those sold without excise bands, Deputy Minister of Industry Faisol Riza announced today (September 29). The plan will be accompanied by an expansion of Tobacco Products Industry Zones (KIHT) to more regions, an initiative that aims to attract illegal cigarette producers into these zones, encouraging them to operate legally under the tax-paying system.

    Data from the Ministry of Industry shows illegal cigarettes rose from 3% of total cigarette volume in 2019 to 6.9 percent in 2023, with machine-rolled clove cigarettes (SKM) making up the bulk of untaxed products. Riza warned that the illegal trade is hurting the domestic tobacco industry, causing idle machinery, reduced production, layoffs, and a negative impact on workers’ welfare.

    Indonesian smokers’ sensitivity to price has fueled demand for cheaper, untaxed cigarettes, the minister said. “A conducive business climate can only be realized if all parties, including the public, work together to eradicate the circulation of illegal cigarettes,” Riza said. The government emphasized that tackling illegal trade is essential to protecting legal producers and sustaining jobs within the sector.

  • Indonesia Won’t Raise Tobacco Tax

    Indonesia Won’t Raise Tobacco Tax

    Reuters reported that Indonesia will keep its excise tax rates on tobacco products unchanged next year, after considering the impact such taxes have on employment in the tobacco industry, Finance Minister Purbaya Yudhi Sadewa told a press conference today.

    “We decided not to increase excise tax rates for tobacco products next year, but we will clean up the market of illegal tobacco products,” Purbaya said, adding his decision has put consideration to avoiding layoffs.

  • Indonesia Weighs Tobacco Tax Hike Amid Worker, Smuggling Concerns

    Indonesia Weighs Tobacco Tax Hike Amid Worker, Smuggling Concerns

    Earlier this week, Indonesia’s Finance Minister Purbaya Yudhi Sadewa said that any increase in tobacco excise must be paired with safeguards for workers, warning that steep hikes could push the sector into decline without social protection programs. “You can’t kill the industry unless there’s a program to absorb the displaced workforce,” he told reporters, noting the risk of mass layoffs if cigarette excise rates rise too quickly.

    While higher taxes are designed to cut smoking rates and boost state revenues, Purbaya stressed the need for transition planning. He said he would review the condition of East Java’s cigarette industry and study the growing illegal market, which he warned is eroding legitimate businesses. The finance ministry is also investigating counterfeit excise stamps, which Purbaya believes could be costing the state significant revenue.

    Deputy Finance Minister Anggito Abimanyu confirmed that the 2026 excise tariff remains under review. Lawmakers recently agreed to raise the government’s 2025 customs and excise revenue target to Rp336 trillion ($19.7 billion), up from Rp334.3 trillion. Final details of next year’s tobacco tariff will be determined after an evaluation of this year’s performance.

  • Indonesia Looking to Crack Down on Illegal Cigarette Trade

    Indonesia Looking to Crack Down on Illegal Cigarette Trade

    Indonesia’s Finance Minister Purbaya Yudhi Sadewa pledged a crackdown on the country’s illegal cigarette trade, warning that anyone involved—including officials inside Customs or the Finance Ministry—will face consequences. Speaking at a budget briefing in Jakarta today (September 22), he vowed to conduct random checks on distribution channels and ordered e-commerce platforms to block illicit product listings, adding: “Spread the word: wherever illegal cigarettes are being sold, I will come.”

    The announcement comes as Indonesia enforces new 2025 tobacco excise rules. While excise tax rates remain unchanged, the government raised minimum retail prices across categories to deter smuggling and under-the-counter sales. Excise duties range from Rp 1,231 ($0.08) per stick for premium machine-made kretek to Rp 223 ($0.013) per stick for lower-tier hand-rolled kretek, with e-cigarettes taxed up to Rp 6,776 ($4.07) per milliliter. Despite these measures, around 22 billion sticks of illicit cigarettes were sold in 2023, costing the state Rp 15 trillion ($940 million) in lost revenue.

  • Indonesia Reviews Cigarette Excise Amid Forgery Allegations

    Indonesia Reviews Cigarette Excise Amid Forgery Allegations

    Indonesia’s government is conducting an in-depth review of the cigarette excise system following allegations of forgery and manipulation, Finance Minister Purbaya Yudhi Sadewa said after a meeting with President Prabowo Subianto. Sadewa noted that he has yet to reach any conclusions, stressing that policy decisions, including whether to proceed with the planned 2026 excise hike, will depend on the results of ongoing studies and field investigations.

    “I will review it again,” Sadewa was quoted in an article from the Indonesian News Agency when asked about the proposal to cancel the planned excise hike. “I have not conducted an in-depth analysis yet — what exactly is going on with cigarette excise? They say there is manipulation, but where exactly is this manipulation happening?”

    The minister highlighted the potential revenue gains from eliminating counterfeit excise stamps, saying such reforms could strengthen state finances without placing additional pressure on consumers. “If I can resolve this and eliminate counterfeit excise, how much revenue would that generate? From there, I can plan the next steps,” he told reporters.

    Lawmakers are also weighing in. At a September 10 parliamentary session, Commission XI member Harris Turino raised concerns about the impact of steep tax increases on major producers like Gudang Garam and their workers, particularly in the machine-made clove cigarette (SKM) sector. He urged the government to prioritize enforcement against illicit trade as a more balanced way to boost revenue.

  • Employers, Union Push Back Against Indonesian Tobacco Tax Hike

    Employers, Union Push Back Against Indonesian Tobacco Tax Hike

    The Indonesian Employers Association (Apindo) and industry representatives warned the government against raising tobacco excise duties next year, citing risks to competitiveness, jobs, and supply chains in the country’s labor-intensive cigarette sector. Apindo chairwoman Shinta Kamdani said further hikes would add pressure on producers already hit by higher excise this year. “If a higher excise is implemented without considering the real conditions of the [tobacco] industry, risks of weakening competitiveness and eroding job opportunities will only grow,” she said.

    Tobacco manufacturers and unions echoed the concerns, noting that higher duties would further squeeze margins, reduce farmer tobacco purchases, and accelerate the shift toward untaxed illegal cigarettes, which already make up nearly half of consumption. With the sector employing millions and contributing heavily to state revenue, they urged the government to balance fiscal goals with economic stability.

    The warning comes as the government targets a 10% increase in state revenue in 2025 to Rp 2.86 quadrillion ($174.9 billion). Finance Minister Sri Mulyani Indrawati has set a 13.5% rise in tax collection as the benchmark, though she admitted the goal was “ambitious” amid weak revenue performance this year.