State Revenue from Cigarette Excise Has Consistently Increased Since 2011

The Indonesian government will raise the excise tax on tobacco products (CHT) for cigarettes by an average of 10% in 2023 and 2024. This was announced by Finance Minister Sri Mulyani following a meeting with President Jokowi at the Bogor Presidential Palace, West Java, on Thursday (3/11/2022).

This increase in cigarette excise tax will be applied variably to machine-made clove cigarettes (SKM), machine-made white cigarettes (SPM), and hand-rolled clove cigarettes (SKP).

"(The cigarette excise tax increase is) an average of 10 percent, it will be shown with SKM I and II which will increase by an average of 11.5 to 11.75 percent, SPM I and SPM II will increase by 12 to 11 percent, while SKP I, II, and III will increase by 5 percent," said Sri Mulyani in her press release, Thursday (3/11/2022).

"Today it was also decided to increase the excise tax on electronic cigarettes, namely an average of 15 percent for electronic cigarettes and 6 percent for other processed tobacco products (HTPL). This will increase by 15 percent annually for the next 5 years," she continued.

State Revenue from Cigarette Excise

Looking back, the government has been raising cigarette excise taxes since at least 2009. Over the last decade, government revenue from this source has steadily increased, as shown in the graph.

According to the audited Central Government Financial Report (LKPP), in 2011, the realization of revenue from tobacco excise was around Rp73.3 trillion. Then in 2021, it reached Rp188.8 trillion.

Cumulatively, during the 2011-2021 period, the realization of tobacco excise revenue increased by 157% or approximately 2.5 times.

Furthermore, tobacco excise revenue in the first half of 2022 reached Rp118 trillion, growing by 33.3% compared to the first half of the previous year.

However, the Finance Minister Sri Mulyani emphasized that the excise increase is not solely aimed at increasing state revenue, but also to reduce the number of smokers and improve public health.

"In previous years, we raised cigarette excise taxes, which caused cigarette prices to increase, thus reducing the affordability of cigarettes. Therefore, it is hoped that consumption will decrease," she said.