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Govt raises prices, imposes extra charge on tobacco sales
The Jakarta Post , Jakarta | Mon, 12/04/2006 1:05 PM
Andi Haswidi, The Jakarta Post, Jakarta
In order to secure the targeted government revenue from tobacco sales in the 2007 state budget, the Finance Ministry has decided to increase the retail price of cigarettes and also to impose an extra charge on cigarette sales in the country on top of the current excise duty.
In a statement issued Saturday, the ministry said the retail price of cigarettes would be increased by 7 percent on March 1.
In addition, cigarette producers would be also required to pay a special charge of Rp 7 per cigarette on cigarette companies grouped in category one with an annual production of above 2 billion cigarettes, Rp 5 per cigarette for category two with an annual production of between 500 million and below 2 billion cigarettes, and Rp 3 per cigarette for category three with an annual production of below 500 million cigarettes a year.
The extra charge, which will be effective in July, next year, will be imposed in addition to the tobacco excise tax currently levied on cigarette sales.
At present the excise tax is 40 percent (of the official retail price) for cigarette makers grouped in the category one, 36 percent for those in the category two and 26 percent in the category three.
The head of the Finance Ministry's public relations department Samsuar Said explained that the decision, which was inked Friday by the Finance Ministry, was intended to secure the government's revenue target from tobacco taxes for the 2007 state budget which was raised to Rp 42.03 trillion (about US$4.6 billion) from Rp 38.62 trillion this year.
Samsuar said that the additional charge was also intended to curb the illegal sale of cigarettes as well as to eliminate unfair practices such as selling the cigarettes in the market at below official prices.
""The current excise system also provides a loophole for tobacco factories to continue to stay in lower categories so that they can avoid paying higher tariffs,"" Samsuar said.
The head of the Association of Indonesian Clove Blended Cigarette Producers (Gaprindo), Mumaemin Moekti, told The Jakarta Post that he was shocked upon hearing the government's decision.
""I can say that I regret the government's decision, especially on the implementation of the specific charge.
""Why should the government implement a more complicated system? The current system has been proven effective for both the gov-ernment and the industry,"" he said.
