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Time to quit?: Tobacco excise hike, weak purchasing power to hit cigarette makers
The government will increase cigarette excise taxes by an average of 12.5 percent in February of next year.
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Workers roll clove cigarettes by hand at the PT Wismilak Inti Makmur factory in Surabaya, East Java, on Jan. 6, 2017. (AFP/Juni Kriswanto)
T
he government’s decision to increase the excise tax on tobacco and tobacco products in 2021 is expected to negatively affect cigarette makers, analysts have said, amid weakened purchasing power as a result of the pandemic.
The government will increase cigarette excise taxes by an average of 12.5 percent in February of next year.
“The majority of the companies’ sales volume comes from machine-made clove cigarettes, including those of [publicly listed cigarette makers] PT HM Sampoerna and PT Gudang Garam,” Mirae Asset Sekuritas analyst Christine Natasya wrote in a research note on Thursday.
Finance Minister Sri Mulyani Indrawati announced on Thursday that the tariff hike was only applicable to machine made clove cigarettes and machine-made white cigarettes. The excise tax on hand-rolled cigarettes would remain unchanged to protect the industry as it employed a large number of workers.
Read also: Cigarette excise tax, employment and industry income
The move aimed to balance public health and the economy so that workers and farmers who had already been affected by the COVID-19 pandemic would not suffer further, she said as reported by kompas.com.
HM Sampoerna spokesperson Elvira Lianita said on Friday the company was “still studying the excise policy as it was just announced, and the Finance Ministry has yet to issue a regulation on the matter”.
