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Tax increases to create major problems for RI's cigarette industry
On the decline: The Indonesian Cigarette Producers Association (Gappri) says the governmentâs plan to increase tobacco taxes by 23 percent will have a major impact the cigarette industry
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On the decline: The Indonesian Cigarette Producers Association (Gappri) says the governmentâs plan to increase tobacco taxes by 23 percent will have a major impact the cigarette industry.(tempo.co) (Gappri) says the governmentâs plan to increase tobacco taxes by 23 percent will have a major impact the cigarette industry.(tempo.co)
O
span class="inline inline-center">On the decline: The Indonesian Cigarette Producers Association (Gappri) says the government's plan to increase tobacco taxes by 23 percent will have a major impact the cigarette industry.(tempo.co)
Indonesia's cigarette manufacturers are worried that the government's plan to increase tobacco taxes by 23 percent -- as stipulated in the draft of the 2016 state budget (RAPBN) bill -- will have a serious impact on the cigarette industry.
The Indonesian Cigarette Producers Association (Gappri) said on Tuesday that the government's plan to increase the tobacco excise was irrational amid Indonesia's economic slowdown.
Gappri chairman Ismanu Soemiran said the tobacco excise plan could become a major issue, since people's purchasing power had reduced Indonesia's cigarette production by 12 percent as of July. 'This is the first time we have had such a production decline since 2003,' said Ismanu as quoted by Kontan on Tuesday.
He said declining cigarette production could not be separated from Indonesia's economic condition. With climbing inflation, the purchasing power of cigarette consumers had declined.
'With such conditions, if the government wants to increase the tobacco excise, a 6 percent to 8 percent hike will be enough,' said Ismanu.
In the 2016 RAPBN, the government is proposing a 23 percent increase in tobacco excise revenues to Rp 148.85 trillion (US$10.42 billion). The figure accounts for 95.72 percent of the total excise revenue target in 2016, which amounts to Rp 155.5 trillion.
Ismanu said the target was not realistic because this year's cigarette sales had the potential to decline by 12 percent compared to sales last year. If the tobacco excise increased again next year, the country's cigarette sales could decline further, he added.
Cigarette manufacturer PT Wismilak Inti Makmur Tbk (WIIM) corporate secretary Surjanto Yasaputera rejected the tobacco excise hike plan. He said that if the government insisted on increasing the tobacco excise, his company had no choice but to increase cigarette prices.
'How much we increase our cigarette prices will depend on the increase of the cigarette excise tariffs,' said Surjanto.
This year, Wismilak is targeting to increase the volume of its cigarette sales by 16 to 18 percent from last year's volume.
Surjanto said however that if there was a price increase next year due to high taxes, Wismilak cigarette sales would likely decline. 'How much of a percent will it decline by? It is still quite difficult for us to predict,' said Surjanto.
Based on Wismilak's financial report released by the Indonesia Stock Exchange in June, WIIM's sale value increased from Rp 734 billion last year to Rp 879 billion this year. Meanwhile, Wismilak's profit was up to Rp 57 billion from Rp 53 billion last year. (edn/ebf)(++++)
