Government bans new cigarette firms from starting new operations<\/p>\n
Rendi A. Witular, The Jakarta Post, Jakarta<\/p>\n
The Directorate General of Customs and Excise has temporarily
\nbanned existing cigarette companies from setting up new
\nsubsidiaries or new players from entering the industry, amid
\nallegations of rampant excise evasion and fraud.<\/p>\n
Director General of Customs and Excise Eddy Abdurrahman said
\nthat the directorate had been withholding operating licenses for
\nnew cigarette companies since January this year, because there
\nwas an indication that they were established to evade excise.<\/p>\n
\"We have decided not to grant operating licenses to those
\nfirms until we are sure that the fraud has been eliminated or
\nreduced,\" said Eddy after a hearing with House of Representatives
\nCommission IX for finance on Tuesday.<\/p>\n
Based on the existing regulations, cigarette companies need
\nthe prior approval of the directorate and the Ministry of Trade
\nand Industry to operate. The companies cannot operate unless they
\nreceive an excise register number issued by the directorate.<\/p>\n
Eddy said that the directorate would not issue operating
\nlicenses for new cigarette companies, even if they had received a
\ngo-ahead from the Ministry of Trade and Industry.
\n The policy would be applied to either existing cigarette
\ncompanies planning to establish new subsidiaries or new small-
\nscale players wishing to enter the industry, he said.<\/p>\n
Eddy explained that recently there was an indication that
\nlarge and medium-scale cigarette companies established a new
\nsmall subsidiary in order to evade excise, as the latter was
\nbased on a company's scale of business.<\/p>\n
The larger the company, the more it has to pay in excise.<\/p>\n
According to Eddy, currently the directorate had difficulty in
\nsupervising such companies because of their huge numbers and vast
\nproliferation. Most are located in Central Java or East Java
\nprovinces.<\/p>\n
He said that some of the companies had also faked their excise
\nlabels to avoid paying higher excise.<\/p>\n
The directorate estimated that the excise evasion and fraud
\nhad caused the state to suffer at least Rp 1 trillion (US$119
\nmillion) in losses of excise revenue a year.<\/p>\n
Some 98 percent of excise revenue comes from the cigarette
\nindustry, with the liquor industry contributing the remainder.<\/p>\n
Under the state budget, the government has set a Rp 27.7
\ntrillion excise revenue target for 2004, up from Rp 26.3 trillion
\nlast year.<\/p>\n
The government pledged not to raise excise rates on cigarettes
\nthis year to allow the industry to recover from a slump.<\/p>\n
As the excise rate will be frozen this year the government can
\nonly expect to benefit from an increase in excise revenue if
\nthere is an increase in the number of smokers and drinkers.<\/p>",
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