Tobacco Excise Increase Affects Small Industries, Ministry Says

TEMPO.CO, Jakarta - Industry Minister Airlangga Hartanto said that an increase in tobacco excise has the potential to affect small kretek cigarette industries. Therefore, the Minister underlined the importance of maintaining the increase in a manageable level, especially for small cigarette industries.

"So, the effort to generate higher revenue should not harm the industry," Airlangga said the Coordinating Maritime Affairs Ministry office in Jakarta on Monday, October 17, 2016.

Airlangga added that if the tobacco excise was to be raised significantly, only large-scale cigarette industries would survive. Airlangga claimed that he has a solution to make small cigarette industries to remain afloat, namely different excise rates for small and large cigarette industries.

Airlangga explained that the increase in tobacco excise depends on the cost of goods sold and cannot be immediately increased. Finance Minister Regulation No. 147/PMK.010/2016 on the third amendment of the Finance Minister Regulation on the Tobacco Excise issued by Finance Minister Sri Mulyani does not only govern the average excise rate at 10.54 percent, but also the retail price limit.

By January 1, 2017, the retail price limit is required no lower than the tobacco excise rate applied. In addition, the regulation also states the retail price must not be lower than the retail price per stick or gram.

DIKO OKTARA