Punitively taxing smokers

The Jakarta Post   |  Fri, 11/20/2009 9:33 AM  |  Opinion

The average rise of only 15 percent in excise taxes the government will slap on tobacco products starting next year takes into consideration only fiscal revenues and the old facts that the cigarette industry is a major employer,  a big source of tax receipts and livelihood for hundreds of thousands of farmers.

The tobacco excise tax policy completely ignores the urgent need for tobacco control to minimize health hazards inflicted by smokers on themselves and the people around them.

Little wonder cigarette prices here remain the lowest in Asia. A pack of Marlboro, for example, costs only about Rp 10,000 (US$1), as against the equivalent of Rp 60,000 in the United States.

Worse still, as Indonesia is one of only two countries in Asia – North Korea is the other – that have not yet ratified the World Health Organization Framework Convention on Tobacco Control, our country has become a paradise for tobacco producers where cigarette companies are virtually free to market and advertise.         

Look at how such international companies as Philip Morris International of the US and BAT, faced with severely tough marketing regulations in the developed world, had been willing to pay premium prices to acquire control of PT Sampoerna and PT Bentoel, two of the four biggest cigarette producers, in 2005 and 2007, respectively.

In the absence of a comprehensive regulatory framework on tobacco marketing and promotion, the taxing power is now the most effective tool available to decrease the number of smokers or at least curb its growth.

Hence, the government should have raised the excise taxes by a much higher rate to make tobacco prices punitively high.

The excise tax law allows excise taxes on tobacco products to be as high as 275 percent of their factory prices or 57 percent of their retail prices.

Raising tobacco excise taxes is politically and commercially an easy way of increasing fiscal revenues because the estimated 70-80 million addicted smokers in the country, who consume about 250-270 billion cigarettes a year, are not likely to organize street protests.

The government should no longer be held captive to the perception that strictly controlling tobacco marketing would adversely harm the economy.

Certainly, it is obviously impossible to completely and immediately ban smoking, given the estimated  seven million people directly employed in the industry, the 600,000 farmers living on tobacco growing and the significant sum of fiscal revenue – Rp 56 trillion next year – the government will raise from tobacco excise taxes.

This is all the more reason the government should devise a long-term, comprehensive  tobacco consumption and marketing regulation to allow time for tobacco farmers to diversify into other crops and the government to seek alternative sources of revenue to replace tobacco.

While the enactment of a law on tobacco control could jump-start a nationwide campaign against smoking, there is actually not a single law now that prohibits the government from issuing and enforcing regulations on tobacco control through severe restrictions on sales, advertisements on buildings and places where people can light up.             

The government should ally with anti-tobacco NGOs to launch a nationwide antismoking campaign to make people understand the full extent of the grave health hazards caused by smoking and to create a conducive public-opinion environment against smoking.

Tobacco control is not discriminative treatment of a legal industrial product but is all about health protection.

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