Illegal Cigarette Trade Increases after Excise Duty Hikes

TEMPO.CO, Jakarta - The Indonesian Cigarette Manufacturers Association (Gappri) said that tobacco excise hikes in the last three years have resulted in increasing illegal cigarette trade in Indonesia. Gappri chairman Ismanu Soemiran said that the cigarette production has declined over the years following the hikes.

“In the past three years, it declined 1 percent per year. If tobacco excise duty increases next year by 10.04 percent, cigarette production will drop by 2-3 percent. It would open up even more avenues for illegal cigarette trade,” Ismanu said yesterday in Jakarta.

He said that when production cost and sales price are high, illicit cigarette trade will flourish. Illegal cigarettes are sold without paying excise duty, allowing illegal traders to profit from the sales.

Data show that in 2010, illegal cigarette trade accounted for 6.2 percent, 8.4 percent in 2012, 11.7 percent in 2014 and 12.1 percent in 2016.

He said that cigarette excise duty increase will make smokers seek illegal, cheaper cigarettes. Even more so because the law enforcement on illegal cigarettes is not easy as sellers are covering up for each other.

Moreover, he expects the government to review its plan to increase tobacco excise duty next year.

IMAM HAMDI