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Cigarette excise hike set for 2022
The hike is expected to raise state revenue and reduce smoking, especially among children.
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T
he Finance Ministry is set to raise cigarette excises by up to 12 percent next year to increase state revenue and bring down smoking, especially among children.
The ministry said on Monday it would raise excises by an average of 12 percent in 2022 from this year for machine-made clove cigarettes (SKM) and white cigarettes (SPM).
For hand-rolled cigarettes (SKT), which are produced through labor-intensive processes, the government will cap the hike at 4.5 percent.
“Excise tax is an instrument to control [consumption] in line with the excise tax law,” Finance Minister Sri Mulyani Indrawati said in a press briefing on Monday.
The government has been raising tobacco excises every year since 2014 as part of its efforts to reduce smoking among children and teens between 10 and 18 years old to 8.7 percent by 2024. The excise was raised 12.5 percent this year.
Read also: Jakarta moves to take down cigarette ads in latest tobacco control campaign
The latest increase is expected to bring down smoking prevalence to 8.83 percent in 2022 from an estimated 9 percent this year, according to Sri Mulyani.
The government also raised the price floor for cigarettes across all categories, resulting in much higher retail prices. The price floor for the SPM I category, for example, will be up by 12.01 percent annually to Rp 40,100 (US$2.8) for a 20-cigarette pack in 2022.
For the top-selling brands of cigarettes, the retail price will be Rp 38,100 for a 20-pack, making it the third-highest in the region, after Singapore and Malaysia.
Sri Mulyani said the latest excise tax hike was estimated to lead to a 3 percent fall in production to 310.4 million cigarettes in 2022 but still bring in Rp 193.5 trillion in state revenue, roughly 10 percent of the total.
Anticipating the latest hike, the Cigarette Manufacturer Association (Gappri) – a tobacco lobby – sent a letter to President Joko "Jokowi" Widodo on Aug. 9 asking the government not to raise the excise next year, kontan.co.id reported.
Gappri chairman Henry Najoan said the tobacco industry had been hit hard in 2021 by the previous excise hike, falling cigarette consumption amid a waning purchasing power and rising competition from illegal cigarettes.
"Gappri expects production to decrease 15 percent this year. This negative production trend will worsen the condition of the national tobacco industry and affect state revenue," he said.
