The Jakarta Post, Jakarta
Amid new bylaws cramping their freedoms, smokers and drinkers in Jakarta may soon have another reason to quit their habit, with plans to raise the excise on products including cigarettes and spirits.
Although some may hail the move as part of the government's bid to improve its citizens' health while padding state revenues, the proposal has quickly stirred debate on whether the increase could hurt the country's tobacco industry, a sector which contributes significantly to economic growth and employment.
More controversy surrounds taxes on nonalcoholic beverages and, perhaps the most controversial, on cement -- both of which could have far-reaching economic impact.
In a recent hearing with the House of Representatives on the amendment of the 1995 Excise Law, the Finance Ministry's Director General for Customs and Excise, Eddy Abdurrachman, proposed raising the excise to a maximum 65 percent on the retail price of certain products, and up to 340 percent on their factory price.
The law had set maximum rates of 55 percent and 250 percent respectively, applied both on locally made or imported products.
Eddy also mentioned that the government planned to extend the excise from the existing two categories of tobacco products -- cigarettes and cigars -- and alcoholic drinks of beer and spirits.
New categories consist of ""products whose consumption needs to be controlled"", ""whose distribution needs to be supervised"", ""whose production and use may bring harm to the public and the environment"", and ""whose use needs to be taxed for public fairness"".
""The new law will therefore apply excise on four categories of products, from the current two,"" Eddy said, mentioning cement and soft drinks as examples in the new categories.
He argued that cement would be imposed excise tariff because its the production causes a severe amount of dust hazardous to public health and the environment. Soft drinks, meanwhile, fell into the last category, as it was mostly consumed by the public's upper bracket.
The proposed amendments have been assailed from several quarters, including former finance ministers, whom the House invited for the deliberation of the bill.
Mari'e Muhammad, who served as finance minister from 1993 to 1998, advised the government to carefully weigh the possible counterproductive impact on the economy from the new excise rates and product categories.
""The government must not only focus on state revenues, but also the whole economy, including job creation,"" he said, arguing the increased excise could deliver a severe blow to the tobacco industry, which is among the country's highest employment absorbing sectors.
""Our economy already has too many fees, so let's not worsen this.""
Mari'e also criticized the ambiguous definition of the new categories that could affect other sectors, including the cement industry.
""If cement is considered harmful to the environment, then every mining product could be, too, and also charged with excise,"" he said.
The government is expecting to raise Rp 36.5 trillion (about US$3.8 billion) in excise revenue this year.
