Jakarta, Oct 1 (Antara) - Recent media reports about the possibility of the government hiking cigarette prices to about Rp50 thousand ($3.76) per pack, from Rp15 to 25 thousand ($1.13 to $1.88) have triggered an intense public debate.
Much of the talk is centered around whether the price hike was too high, the efficacy of efforts to cut down the number of smokers, the fate of tobacco industry workers and tobacco farmers and similar other issues.
The idea to increase the price of cigarettes was first floated by Hasbullah Thabrany of the Health and Economic Study Center of the Community Health Faculty of the University of Indonesia (FKMUI).
In keeping with Finance Minister Sri Mulyani's views, the decision to hike the excise rate and cigarettes prices was taken in accordance with the Excise Law and was also included in the draft state budget.
"The Finance Ministry has not yet issued any new regulation regarding hiking the retail sales price or excise tariff on cigarettes," she had said in August.
However, on Friday, the minister announced that the government¿s decision to raise the excise duty on tobacco. It will become effective next year as per the Finance Minister's Regulation No.147/PMK.010/2016.
In the new policy, the highest excise duty on tobacco excise has been set at 13.46 percent for machine-rolled non-clove white cigarettes (SPM) while the lowest levy has been set at zero (0) percent for category IIIB hand-rolled clove flavored cigarettes (SKT). The average increase will come out to be 10.54 percent.
Besides raising the excise tax rates on tobacco, the government also increased the retail prices of cigarettes by about 12.26 percent.
The new policy in the excise sector will have a direct impact on about six million people in Indonesia, making it imperative for the government to consider various aspects of the policy.
According to Minister Sri Mulyani, as far as the manpower aspect was concerned, the policy on excise will directly impact the formal working sector that employs 401,989 workers, of whom 291,824 are involved in the SKT industries. This is a highly labor intensive sector.
If the informal sector is taken into account, the policy will affect 2.3 million tobacco farmers, 1.5 million clove farmers, 600 thousand tobacco farmers and one million cigarettes retail traders.
Based on these statistics, it becomes clear that that the policy will have a significant impact on the life of about 5.8 million people in Indonesia.
"This is consistent with the study results of the Economic and Society Studies Institute (LPEM) of the University of Indonesia (UI) in 2013, which said that excise has a direct impact on the life of over six million people," added Sri Mulyani.
The main reasons that prompted the government to issue the policy included the need to control the production of cigarettes and cut down illegal circulation of cigarettes and excise receipts.
Regarding the health aspect, the policy also aims to regulate the way the funds are returned to the regional governments in the form of health allocation funds.
These funds, also called earmarked funds, stood at Rp11.2 trillion in 2014, Rp15.14 trillion in 2015 and Rp17 trillion in 2016.
This increase in the allocated funds indicated that the government was indeed paying due attention to the health sector. Besides, funds would also be needed since many jobs will shift from cigarette factories to other industries.
"This is receiving our attention as illegal cigarettes endanger our health. Also, there is the issue of availability of jobs because the move will affect a number of legal cigarette related products," the minister noted.
The minister also hoped that the increase in the tobacco excise duty would contribute positively to the government's revenues in the customs sector.
For 2017, the government has set a revenue target from the customs sector at Rp149.8 trillion, which is about 10 percent of the total tax revenues. "Though it has slightly declined, it still contributes significantly. The government and the people should back the policy because if it misses its target, it will affect the state budget, which, in the end, will affect the national development programs," Minister Sri Mulyani stressed.
Sri Mulyani stated that the policy was discussed with various stakeholders, including those concerned with health and employment, tobacco farmers, tobacco companies and associations.
Meetings were also held with local governments, foundations and universities to discuss the matter.
In the meantime, a youth community group, Smoke Free Agent (SFA), has backed the government's move to raise cigarette prices, arguing that the number of young smokers in Indonesia has been rising at an alarming rate. A total of 54 percent of Indonesian children are now smokers, and thus, the government is determined to wean away children and women from smoking.
"In addition to reducing the number of adult smokers, cigarette price hikes may also discourage new smokers, who are mostly children and adolescents," Ricki Cahyana of the Anti-Smoking Indonesia Community stated in a press release issued by the SFA on Wednesday.
Ricki noted that on an average, adults started smoking by the age of 16, and 30 percent of Indonesian children began smoking before the age of 10.
Hasna Pradityas, one of the initiators of the SFA, remarked that the tobacco industry is currently aggressively targeting children as potential consumers to replace adult smokers in the future.
"Without young smokers and children, the tobacco industry would become bankrupt when adult smokers no longer exist," he pointed out.
However, the cigarettes price increase as announced by the government was considered still low by activists.
The government's plan to increase excise on cigarettes by about 10.54 percent next year is not in line with the aspiration of the people who want a higher increase, a consumer activist has said.
"Most of the Indonesian people want that the excise and prices of cigarettes should be increased significantly to protect people from the dangers of cigarettes," Tulus Abadi, the executive board chairman of the Indonesian Consumers Institute Foundation (YLKI), said in Jakarta Saturday.
Besides protecting people from the negative impact of cigarettes, a significant increase in excise on cigarettes will also protect poor families from becoming poorer and poorer as a result of cigarette consumption.
Excise is an instrument exercise control. An increase in such a levy should be aimed at reducing the purchasing power of the public, Tulus observed.
With an average increase of about 10.54 percent, the public will still be able to buy cigarettes easily and excise, that can be used as a tool for control, will have no impact, according to Tulus Abadi.***3***
(A014/INE/B003)EDITED BY INE(T.A014/B/BESSR/Bustanuddin) 01-10-2016 19:43:3 |
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