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ncreasing the cigarette excise tax is seen as one of the most powerful tools to control cigarette consumption. At present, almost 50 percent of the selling price of cigarettes in Indonesia consists of excise tax.

However, the relationship between cigarette excise tax and data about smoking activities is quite puzzling. The Health Ministry indicated that the ratio of male smokers increased from 53.4 percent in 1995 to 66 percent in 2013. According to a World Health Organization (WHO) survey, about 20 percent of males started smoking at the ages of 13 to 15 in 2014.

Today, Indonesia has the highest prevalence of male smokers in the world.

If raising the excise tax on cigarettes has been effective, why is there a rise in the number of smokers? Why are teenagers tempted by cigarettes more than ever before?

Affordability is the key problem. A pack of cigarettes in Indonesia costs only around US$1.40, compared to $9.50 in Singapore, $3.70 in Japan, $3.50 in Malaysia, $3.30 in China and $3.20 in India.

Moreover, even though the cigarette excise tax has increased annually, the average income of consumers has also increased. This means that the purchasing power of consumers has significantly improved to counter the increase in the selling price. The South East Asia Initiative on Tobacco Tax (2012) claims that the price of a pack of cigarettes, relative to the daily minimum wage in Indonesia, is extremely low.

Many studies state that an increase in excise tax on cigarettes prevents the youth from smoking because they are sensitive to price increases. But I think this trend is not so prevalent in Indonesia.

The youth are in an exploration phase and the early stages of addiction so consumption is small and flexible. They can find a way to smoke not by buying cigarettes in a pack, but per stick. Moreover, retailers do not discourage them from buying cigarettes.

Raising the excise tax on cigarettes by a punitively high rate may be challenging. Not only because of its negative impact on sales and consequently state income, but also on employment. Politically, it is also a sensitive issue. The bargaining power of cigarette producers has always been quite strong because they often exploit the support of tobacco farmers.

On the other hand, extremely high prices may also encourage the illegal production of cigarettes. It needs an extraordinary effort to prevent this from happening. A case study from Malaysia revealed that a huge increase in cigarette excise tax resulted in a sharp rise in the illegal production of cigarettes.

As a result, the government lost revenue and the number of smokers did not change significantly as expected. In 2016, illicit cigarette consumption in Malaysia was roughly 36 percent of total consumption, almost double compared to the previous year.

Educating people about the dangers of smoking takes time. But we can overcome this problem by limiting smoking areas in public places such as recreation areas, shared workplaces, stations and restaurants. This is generally called a smoke-free policy.

Empirical evidence from WHO & the University of Waterloo showed that since smoke-free policies were implemented in restaurants, smoking activity has dropped sharply in a matter of two to three years. Ross & Chaloupka states relatively strong clean indoor air laws may reduce the probability of smoking.

A smoke-free policy should be applied extensively. Although smokers can still freely buy cigarettes, they are no longer smoking freely. Resisting this policy is not as easy as an excise tax policy since the authority is more decentralized.

Smokers have to deal with many local authorities whereas excise tax is just dealing with the Finance Ministry. This policy also does not encourage illicit cigarette production.

Implementing a smoke-free policy has enough room to succeed in Indonesia since the WHO survey claims that nine out of 10 adults have been exposed to tobacco smoke in restaurants, six out of 10 in the workplace and three out of five students in enclosed public places.

Raising the excise tax on cigarettes should consider the purchasing power of consumers and make the real selling price of cigarettes expensive enough, but it will not be easy.

The smoke-free policy should be considered as a spearhead to combat cigarette use.
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The writer is an economic researcher at the Welfare Initiative for Better Societies, an NGO-based think tank on welfare issues in Jakarta.