Indonesia Allocates 50% of Tobacco Tax for Social Protection Fund

The Indonesian Presidential Office (KSP) has stated that 50% of the tobacco product excise tax revenue sharing fund (DBH CHT) will be allocated to support a social protection fund for tobacco industry farmers and workers.

According to a statement received by Edy Priyono, the director of the Presidential Office on Saturday, efforts are being made to predict how global economic uncertainty will affect Indonesia's tobacco industry.

Priono stated that social protection will be implemented through various programs such as providing fertilizer assistance, agricultural machinery for production or harvest, and direct cash assistance.

The work of social protection is in line with the outcomes of coordination meetings participated by the Office of the President, the Ministry of Finance, the Ministry of Agriculture, the Ministry of Internal Affairs, and as many as 77 local governments at the provincial, county, and city levels.

At present, the Fiscal Balance Bureau of the Ministry of Finance has issued a letter regarding the use of 2023 DBH CHT. According to a statement from the bureau's spokesperson, the letter is addressed to local governments that have agreed to receive DBH CHT, as they are the planners and implementers of the program.

As a follow-up to the program, local governments must actively disseminate information about the social protection plan for farmers and tobacco industry workers in their respective regions.

Priono is optimistic about the participation of the Tobacco Farmers Association in the plan to strengthen social protection through cooperation with their respective local governments.

He said, "We hope that the plan will be tailored to suit the characteristics of each region.

According to Regulation No. 215 of the Finance Minister in 2021, 3% of tobacco consumption tax revenue is allocated to a profit sharing fund to be managed by the governments of production regions.

He explained that in the income sharing fund, up to 50% of the funds must be used to improve people's welfare, with the remaining 40% to be used for healthcare and 10% for law enforcement.

He emphasizes that the policy of increasing the consumption tax on tobacco products must also have an impact on the welfare of farmers and workers.

Earlier, the government made the decision to increase the Consumption and Health Tax (CHT) on tobacco products by 10% during the period of 2023-2024. This policy takes into consideration various aspects such as controlling cigarette consumption, workers’ welfare, national revenue and monitoring illegal cigarette sales.