Economist Deems 12% Hike in Cigarette Excises Win-Win Solution

TEMPO.CO, Jakarta - Director of Human Resources at the University of Indonesia, Abdillah Ahsan, opined that the hike in cigarette excises by 12 percent on average in 2022 is a win-win solution policy.

“There are four wins. First, the prevalence of smoking will decrease which is good for health and the economy,” said Abdillah in a written statement, Wednesday, December 15.

The government targeted to suppress the prevalence of smoking among adults from 33.2 percent to 32.26 percent and among children from 8.97 percent to 8.83 percent.

The economist also said the policy will increase state revenues. Based on the 2022 State Revenue and Expenditure Budget Law, the revenue value from the excise tax hike is estimated to reach Rp193.53 trillion.

The third win, he went on, is the increase in regional revenues and the revenue-sharing funds (DBH) from tobacco excise in the neighborhood of 2 percent of the total state revenues from excise.

Abdillah further explained that the fourth win is the revenue sharing funds and local cigarette taxes could be used to improve the welfare of tobacco farmers.

Previously reported, Sri Mulyani was set to raise the excises on tobacco products by an average of 12 percent in 2022. President Joko Widodo a.k.a. Jokowi had also agreed on the amount of the tariff. However, the tax hike for the hand-rolled ‘kretek’ cigarettes (SKT) was set at a maximum of 4.5 percent.

Read: Cigarette Consumption a Burden to National Health Insurance: Sri Mulyani

CAESAR AKBAR