Government Wants to Reduce Illegal Application of Duty on Tobacco

According to a study the government may leave unchanged excise duty for cigarettes and tobacco next year for to protect the cigarette industry’s employment rate.

Anwar Surpijadi, the Finance Ministry’s Director General of Customs and Excise said: "We expect to count on more excise revenue from an increase in cigarette sales. We forecast the sales will be higher next year."

Mr. Surpijadi sustained that a war against cigarette smoking would hurt the cigarette industry and risks the jobs of its millions of workers.

Scientists found that Indonesia, Southeast Asia’s largest economy, has the lowest average price of cigarettes in the world, and analysts believe the livelihoods of 12 million people are directly or indirectly dependent on the country’s tobacco and cigarette sector.

A pack of red Marlboro is sold for Rp 9,000 (98 US cents), while a pack of Gudang Garam Filter 16 clove cigarettes is priced at Rp 9,500. In China, a similar kind of cigarette brand is sold at the equivalent of at least Rp 12,000.

This year, the government adjusted excise on cigarettes by reducing the so-called "ad valorem tax" system, under which the excise is determined by a brand’s base retail price. The government also increased the duty tax based on the price of a single cigarette.

Based on the 2009 budget plan, the government will continue its policy of gradually replacing the "ad valorem tax" with the per-cigarette tax in order to reduce the illegal application of duty on tobacco. Anwar disagreed with analysts who believe a 60 percent rise in excise duty would boost state revenue, cut the number of smokers and retain a robust cigarette industry.

Anwar Surpijadi considers that cigarettes which are harmful to human health are perhaps those that are illegal or those that have high levels of nicotine. Branded cigarettes have less nicotine.