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Jakarta Post

Excise tax hike will not kill off industry

  • Aditya Suharmoko

    The Jakarta Post

Jakarta   /   Fri, August 1 2008   /  11:54 am

What does the government have to do to boost state income, cut the number of smokers and at the same time retain a robust cigarette industry? Raise the excise tax by more than 60 percent, says a University of Indonesia (UI) study. The study, carried out by UI's Demographic Institute, dispelled the myth that raising the tobacco excise tax would lower sales and thus the state's potential tax revenue, researcher Abdillah Ahsan said at the release of the study Thursday. Abdillah said an excise tax hike would force tobacco producers to raise the price of cigarettes, which would "reduce cigarette consumption by low-income people, empowering them to spend more on other things -- a move that could generate economic value". If those on low incomes spend their money on products other than cigarettes, economic output would increase by Rp 335 billion; it would also lead...