Indonesia to Increase Tobacco Tax to Control Smoking

The Finance Minister of Indonesia, Sri Mulyani Indrawati, has stated that the government's policy to increase the consumption tax on tobacco products (CHT) will automatically raise cigarette prices, thereby helping to control cigarette consumption.

On Monday, she spoke at a working meeting held with the Indonesian House of Representatives' Eleventh Commission (DPR RI) in Jakarta, stating, "By using a consumption tax as a fiscal tool to control consumption, we hope that the tax will increase prices, thereby reducing the number of smokers.

According to the Minister, Indonesia currently has the highest prevalence of adult male smokers in the world, recorded at 71.3%.

Meanwhile, Indonesia has the world's fifth-highest prevalence of adult smokers at 37.6%.

She pointed out that the smoking rate among children aged 10-18 is still very high: recording 9.1% in 2018, 9.87% in 2019, 8.99% in 2020, 9.18% in 2021, and 9.04% in 2022.

The goal of the 2020-2024 National Medium-Term Development Plan (RPJMN) is to reduce the smoking rate among children to 8.7% by 2024.

Indrawati stated that the cigarette prices in Indonesia are relatively cheap at only $2.1, which is much lower than the global average of $4 and significantly lower than Australia, where cigarettes are the most expensive at $21.

As such, the government is backing an increase in tobacco taxes in order to raise the price index of cigarettes, with the aim of potentially reducing public consumption of smoking.

In addition, the minister pointed out that cigarettes are one of the two largest expenses for households in both urban and rural areas of Indonesia.

In fact, an average impoverished household spends 246,382 Indonesian rupiahs per month on cigarettes, which would be better used for purchasing food to improve nutrition.

Furthermore, for every 1% increase in spending on cigarettes, there is a 6% increased likelihood that a household will become impoverished.

This is a dilemma: how do we influence family consumption to prioritize more nutritious products that can help their children grow into healthy and productive individuals?" she asked.

Therefore, the government plans to increase the tobacco consumption tax on hand-rolled cigarettes (SKT) by an average of 10% in 2023 and 2024, with a maximum annual increase limit of 5%.

The government is adjusting the Minimum Retail Price (HJE) by considering market prices and the average growth of cigarette consumption taxes.

The government plans to increase the consumption tax on all types of electronic cigarettes (REL) by 15% annually over the next five years, and to raise the consumption tax on other tobacco products (HPTL) by 6%.