Indonesia to Raise Tobacco Taxes in 2016


The government in Indonesia told it plans to raise tobacco excise taxes by average 11.19%. The change is to come into effect starting from January 2016, after considering all opinions from public health and the tobacco industry.

Heru Pambudi, the Finance Ministry’s director general of taxation, told that there will be introduced the highest tax of 16.47% and it will be applied to machine-rolled cigarettes while hand-rolled cigarettes will face an increase of 12%.

Heru also noted that the government would not raise taxes on hand-rolled cigarettes in the III B group because their production rate is slower than production of machine-made cigarettes.

In Indonesia taxes from tobacco products bring a lot of money to the budget. In 2015 the country planned to gather Rp 139.12 trillion (US$10.29 billion) from tobacco taxes. In the next year the government aims to supplement country’s budget with Rp 171.2 million from alcohol taxes and Rp 148.86 trillion from tobacco taxes.

Heru said he believes that in 2016 the government would achieve its aims regarding revenues mentioned above in spite of a slowing economy. It will occur due to the upcoming regional elections and the increases of taxes on alcohol and tobacco products.

However, Deputy Coordinating Economic Minister Edy Putra Irawady, considers that  in 2020, the Indonesia would no longer take tobacco taxes into account in the state budget, or the contribution of the tobacco-related industry to employment.  This is because the government would make public safety its main priority.

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