THE ADJUSTMENT of tobacco excise rates (CHT) in 2025 deserves appreciation because it is seen as providing a breather for the tobacco products industry.
This policy was welcomed by the industry, which is currently experiencing various serious challenges, starting from the publication of Government Regulation (PP) Number 28 of 2024 and plans for regulations on plain, unbranded cigarette packaging as stated in the Draft Minister of Health Regulation (Draft Permenkes).
The Director General of Customs and Excise at the Ministry of Finance, Askolani, announced that there will be no tariff adjustments for CHT in 2025.
“Regarding the 2025 CHT policy, until the close of discussions on the 2025 APBN Bill, which was adopted by the DPR last week, the government’s position on the 2025 CHT adjustment policy will not be implemented,” he said in Jakarta.
Askolani also said that the 2025 CHT tariff policy will focus on handling the downtrading phenomenon that is widespread, namely the shift in cigarette consumption to cheaper types.
If this phenomenon continues to occur, it will be difficult for cigarette excise revenues to grow. Even though there is no CHT adjustment, the government plans to issue another alternative by adjusting the Retail Selling Price (HJE) at the industry level.
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Even though the excise policy provides a breath of fresh air, there are still many serious challenges facing the tobacco industry, one of which is related to the plan to implement plain, unbranded cigarette packaging. Askolani also highlighted the potential risks arising from this policy on the effectiveness of supervision.
“Because we cannot differentiate between types of cigarettes, which then determines the class, and can also be our basis for supervision,” he explained.
The Ministry of Finance has also submitted input regarding plain, unbranded cigarette packaging to the Ministry of Health (Kemenkes) to ensure that the proposed health policy continues to consider aspects of monitoring and controlling illegal cigarettes.
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On a separate occasion, Senior Economist at the Institute for Development of Economics and Finance (INDEF), Tauhid Ahmad, expressed a similar view.
He revealed that the articles in PP 28/2024 and the Draft Minister of Health regarding plain, unbranded packaging carry significant risks to the economy. INDEF research identifies three economic impact scenarios that should be considered.
The first scenario states that the regulation on plain packaging without brands could encourage a downtrading phenomenon and even switching from legal cigarettes to illegal cigarettes, which could reduce demand for legal products by up to 42.09%.
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“This decrease could result in a potential lost economic impact of IDR 182.2 trillion, and tax revenues falling by IDR 95.6 trillion,” said Tauhid.
The second scenario involves a ban on the sale of tobacco products within a 200 meter radius of educational units and children’s play areas, which is estimated to reduce retail cigarette sales by up to 33.08%.
The potential lost economic impact reaches IDR 84 trillion, with affected tax revenues amounting to IDR 43.5 trillion.
Meanwhile, the third scenario regarding restrictions on outdoor cigarette advertising as well as on TV and online media could reduce demand for advertising services by up to 15%, with a lost economic impact of IDR 41.8 trillion and tax revenues falling by IDR 21.5 trillion.
Seeing these various scenarios, Tauhid emphasized the importance of involving all stakeholders in the tobacco products industry ecosystem.
“This policy must involve every stakeholder, be it ministries, institutions, or business actors, considering the complexity of the tobacco products industry ecosystem in Indonesia,” he said.
Tauhid revealed that INDEF recommends that the government revise PP 28/2024 and cancel the Draft Minister of Health Regulation, especially articles that are considered to have an impact on state revenues and the economy. (Z-10)
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