Jakarta, Oct 28 (Antara) - The government has decided to impose a 10.04 percent excise tax hike on tobacco-based products, particularly cigarettes, beginning January 2018, yet the consumer institute describes it a setback, as it will not reduce cigarette consumption.
In terms of percentage, the 10.04 percent increase in excise tax is a setback, as the hike is too low, and even it is lower than the 11.19 percent in 2016. Every tax hike should be progressive until it reaches the minimum 57 percent, as mandated by the Law on Excise.
Hence, the prevalence of smoking in Indonesia is forecast to increase further, with a hike of only 10.04 percent in the tobacco excise tax in 2018, according to the Indonesian Consumers Foundation (YKLI).
"Poor families and juveniles can still afford to buy cigarettes. An increase of 10.04 percent (in the excise tax) will only raise the price by Rp30 to Rp50 per cigarette," YLKI Chairman Tulus Abadi stated in Jakarta on Thursday (Oct 26).
However, Director General of Customs and Excise of the Ministry of Finance Heru Pambudi explained that the policy on excise tax on tobacco-based products is decided after taking into account four factors: health, cigarette industry, labor or employment, and state revenue.
"The government has determined that the increase in excise tax averages 10.04 percent. I think this is the best by taking into account these four factors," Pambudi noted at the Finance Ministry's complex on Friday (Oct 27).
He also emphasized that the government was not keen to cater to the interests of certain parties. Industry, tobacco farmers, consumers, and the state are among the parties that have interest in the tobacco or cigarette business.
"On one hand, we have been listening to the World Health Organization (WHO), but we also need to consider that this year, there is a significant decrease in cigarette production," Pambudi pointed out.
"Actually, the purpose of the customs regulation is not primarily in the receipt but in control, so the main indicator is how strong it is to control consumption, the case then is revenue," Pambudi remarked.
Currently, tobacco tax rates in Indonesia are around 35 percent, or still lower than the advice by the WHO, which sets the tariffs on tobacco taxes to be at least 66 percent of the retail price.
Meanwhile, Law Number 39 of 2007 on Excise has set the maximum cigarette excise tariff at 57 percent.
YLKI Chairman Abadi stressed that the low increase in the cigarette excise tax by the Finance Ministry will result in higher incidence of smoking, as cigarettes were still affordable, both by poor households or children and adolescents.
"The 10.04 percent increase in excise will only raise the price by Rp30-50 per cigarette, which means that the hike is still affordable, as loose cigarettes can still be bought. In this context, the finance minister has failed to make it a 'tax of sin' and an instrument to control cigarette consumption," he highlighted.
According to Abadi, a survey conducted by the Central Bureau of Statistics revealed that poor families had spent more money on cigarettes than on education and healthy food.
Cigarettes ranked second after rice on the list of items bought by most poor families.
Hence, he asserted that the finance minister has paid heed to the voice of the cigarette industry, including not being independent and neutral about the intervention by the cigarette industry while ignoring the aspirations and inputs of the public that has encouraged the control on cigarette consumption.
"The tax is a sin tax. It should be borne in mind that currently, according to BPJS' (Social Insurance Management Agency's) data, most diseases suffered by patients of the BPJS are degenerative in nature and are caused by the consumption of cigarettes. This is the reason why every year, the BPJS always experiences financial losses. The 2016 deficit had reached Rp9 trillion, and in 2017, it is forecast to reach Rp12 trillion," he remarked.
He said the low percentage increase in excise tax on cigarettes reflected the finance minister's conservative stance in adopting a policy related to the increase in cigarette taxes.
Why should the government be conservative, he questioned, adding that with a higher increase, the government could have collected revenues from the larger excise sector.
"The finance minister should understand this, given the deficit in the state budget, as tax revenue is always falling short of target," he noted.
Moreover, the high tax increase can also serve as an instrument to control the consumption of cigarettes, Abadi emphasized.
Earlier, Finance Minister Sri Mulyani Indrawati had highlighted four issues underlying the tobacco tax rate increase scheme in 2018.
"There are four issues underlying the tobacco tax increase policy," Mulyani had noted in Jakarta on Tuesday (Oct 24).
The minister explained that the first aspect was the impact of the increase in excise tariff on the labor sector. The second issue was related to the health aspect, while the third aspect concerned the handling of illegal cigarettes that cause harm to the industry.
"If more people can afford and easily produce illegal cigarettes, then the industry, society, and workers would all be affected" Mulyani remarked.
The fourth aspect is the revenue from the tobacco excise, which, in the short term, is useful to support the state income.***4***(A014/INE)EDITED BY INE
(T.A014/A/BESSR/A. Abdussalam) 28-10-2017 18:17: |
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