Indonesian tax hike opposed

| August 22, 2016

The Indonesian government’s reported plan to hike cigarette prices has sparked warnings about the consequences likely to be felt by an industry that is a major employer and a major revenue provider, according to an Antara News Agency story.

The chairman of the Indonesian White Cigarette Producers’ Association, Muhaimin Moefti, expressed fears that some factories could face bankruptcy.

The price of cigarettes currently ranges from Rp15,000 to Rp25,000 per pack, and the government is believed to be planning to raise prices up to about Rp50,000 per pack.

This means that a smoker who consumes one pack of cigarettes a day would spend about Rp1.5 million per month on cigarettes, an amount that is, for instance, greater than a worker’s monthly basic minimum wage of Rp1.4 million in West Nusa Tenggara Province.

Bankruptcies within the cigarette industry would harm also state revenues as tobacco-related taxes contribute the largest portion of the country’s tax receipts. Tobacco-related taxes contribute about R141.7 trillion annually to the state’s budget: about 52.7 percent to the country’s overall tax revenues.

Mukhamad Misbakhun, a member of the House of Representatives’ Commission XI on financial affairs said that if prices were raised to Rp50,000 per pack, many cigarette factories would close down and thousands of workers would lose their jobs. It would in the end affect small, medium and large scale industries.

As workers lost their jobs, the number of people living below the poverty line would increase. At the same time, the fate of tobacco farmers would become uncertain as factories absorbing their products lost business.

However, House Speaker Ade Komarudin said state revenues would increase if the government raised cigarette excise.

He said that the government’s plan to hike cigarettes prices was aimed at reducing the number of smokers in the country. He said he was of the view that the price increase would not have a significant impact on the cigarette industry or on tobacco farmers.

Category: Breaking News

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