Indonesia

The Indonesian government is planning to increase the excise tax on cigarettes next year, according to a report in the Jakarta Globe. The move, which is sure to cause a hike in cigarette prices, is meant to boost government revenue ahead of next year’s budget. According to an unnamed senior government official from the Finance Ministry, the excise tax will go up by an average of 12.2%. Head of the Finance Ministry’s Fiscal Policy Office Bambang Brodjonegoro said the draft budget for 2012 was counting on cigarettes to provide the majority of the government excise tax revenue – Rp69 trillion (US$8 billion), a 6.3% increase from this year’s budget of Rp68.1 trillion (US$7.9 billion). The rest of the planned tax revenue will come from alcoholic beverages, CDs, VCDs and DVDs.
Most experts agree that the tax increase will not have a major impact on the tobacco industry since such government moves simply trigger higher prices for tobacco products.
In 2010, Indonesian cigarette companies produced 252 billion cigarettes. The government has announced that next year, cigarette makers will be allowed to produce 268.4 billion, in spite of its so called Tobacco Industry Roadmap, which is supposed to limit annual cigarette production to 260 billion cigarettes by 2015.