T

he average rise of only 8.7 percent in the excise taxes the government will slap on tobacco products starting in January seems to ignore the urgent need for stronger tobacco control to minimize the health hazards inflicted by smokers on themselves and on the people around them.

The excise-tax increase is not high enough to force many of the estimated 80 million to 85 million addicted smokers throughout the country to quit the hazardous habit and cigarette producers to speed up the pace of their diversification into new lines of business.

Even after the rise, cigarette retail prices in Indonesia would remain among the lowest in the region. Certainly, it is not socially and economically feasible to raise the excise tax by more than 25 percent at a time, given the estimated 500,000 farmers still living on tobacco growing and the almost seven million people employed directly and indirectly in the cigarette industry.

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.

The latest policy still takes into serious consideration the economic impact, as the highest rate of increase, amounting to almost 17 percent, will be slapped on mass-produced, machine-rolled clove cigarettes, while the excise tax on hand-rolled clove cigarettes will be raised by only 5.4 percent.

These new rates will increase the excise tax on machine-rolled cigarettes to Rp 355 (US$0.03) and on hand-rolled cigarettes to Rp 290 per stick, thereby raising excise-tax revenues to Rp 120.5 trillion next year, from this year'€™s target of Rp 111 trillion.

As Indonesia is now the only country in Asia (besides North Korea) that has yet to ratify the World Health Organization'€™s Framework Convention on Tobacco Control, our country has become a paradise for tobacco producers where cigarette companies are virtually free to market and advertise.

The enforcement of the regulation introduced last June, requiring cigarette makers to put graphic or pictorial health warnings on cigarette packaging that occupy 40 percent of the packet, seemed to not be effective in encouraging addicted smokers to quit and discouraging new smokers.

In the absence of a comprehensive regulatory framework on tobacco marketing and promotion, the taxing power is now the only powerful tool available to decrease smokers or to at least curb their growth. Hence, the government should have raised the excise taxes by a much higher rate to make tobacco prices punitively high.

A higher annual increase in the excise tax would not cause an adverse impact on the economy if this measure is tied to a long-term program to allow for tobacco farmers to diversify into other crops and for the government to seek alternative sources of revenue to replace tobacco, which accounts for 95 percent of total excise tax revenues. This program can be implemented in cooperation with the administrations in the producing regencies and towns, which directly get 10 percent of tobacco excise-tax receipts.