Illustration (kompas.com)

The government has announced an increase in tobacco excise taxes, by an average of 11.19 percent, starting on Jan. 1, 2016, after taking into account both the condition of the cigarette industry and public health.

'€œThe highest tax increase of 12.96 to 16.47 percent will be applicable to machine-rolled cigarettes and the lowest increase of 0 to 12 percent will apply to hand-rolled cigarettes,'€ said the Finance Ministry'€™s director general of taxation Heru Pambudi on Monday as quoted on tempo.co.

Heru said the government would not increase taxes on hand-rolled cigarettes in the III B group because of their slower production rate in comparison to machine-made cigarettes.

Tobacco tax is still one of the leading sources of excise revenue. This year the government has set a target of Rp 139.12 trillion (US$10.29 billion) for tobacco tax revenue. In total, the excise revenue target listed in the 2016 state budget is Rp 155.52 trillion. This amount includes Rp 148.86 trillion from tobacco taxes and Rp 171.2 million from alcohol taxes.

Heru expressed his optimism that the government would reach its targeted cigarette excise revenue despite a slowing economy, mainly due to the upcoming regional elections and the proposed tax increases.

'€œ[At] regional election time ['€¦] consumption usually increases,'€ he said.

Meanwhile, Deputy Coordinating Economic Minister Edy Putra Irawady said last week that in 2020, the government would no longer take tobacco taxes into account in the state budget, or the contribution of the tobacco-related industry to employment.

Edy said that by 2020, the government would have prioritized public safety over the [economic] impacts of the tobacco industry. (bbn)(+)

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