Causing Decline in Regional Revenue and Industry Collapse: Customs to Crack Down on Illegal Cigarettes
The Jakarta Regional Office of Customs and Excise has launched an ‘illegal cigarette crackdown’ movement, following the impact of their circulation which has begun to suppress regional original revenue (PAD) and destabilise the growth of the legal tobacco industry (IHT).
The Head of the Jakarta Customs Regional Office, Hendi Darnadi, stated that the circulation of illegal cigarettes, particularly in Jakarta, is not only eroding state fiscal revenue but also suppressing regional original revenue in the form of tobacco taxes and creating unfair business competition.
“We also hope and invite the community and business actors to work together in supporting the ‘illegal cigarette crackdown’ movement. Do not buy, sell, store, distribute, or consume illegal cigarettes,” said Hendri, as quoted from a written statement following a press conference on illegal cigarette enforcement.
Hendri noted that recent enforcement actions against illegal excisable goods by the Jakarta Customs Regional Office and the Marunda Customs Office reached 10,067,000 illegal cigarettes. This was obtained from three enforcement operations between 31 August and 1 September 2026, with an estimated potential loss to the state of Rp7,510,429,600.
The Marunda Customs Office also received 716,800 illegal cigarettes, packed in 45 packages, handed over by the West Jakarta Metro Police. The potential loss to state excise from this seizure is Rp534,732,800.
Consequently, the total amount of seized illegal cigarettes stands at 10,783,800 sticks, with an estimated potential loss to the state reaching Rp8,045,162,400.
Throughout 2026, the Jakarta Customs Regional Office has conducted enforcement against illegal cigarettes totaling 59.8 million sticks, with a potential loss to state excise of Rp46.79 billion. This figure represents an increase of approximately 257% compared to the same period in 2025, which stood at 23 million sticks.
During the same event, the Secretary of the Directorate General of Agro-Industry of the Ministry of Industry, Yulia Astuti, stated that the circulation of illegal cigarettes has proven to harm the legal tobacco industry (IHT) and its entire ecosystem, from upstream to downstream.
According to her, the prevalence of illegal cigarettes continues to erode the performance of the tobacco industry. Based on Ministry of Industry records, domestic cigarette production has declined by approximately 3%.
This decline is also reflected in the performance of the IHT sector. The Gross Domestic Product (GDP) growth of the tobacco industry sector, which was recorded at 3.49% in 2024, fell to -1.37%, and contracted further to -1.96% in the second quarter of 2026.
“In line with this, state revenue related to tobacco excise has also been impacted. One of the reasons is the prevalence of illegal cigarettes recently,” she explained.
Yulia assessed that the pressure on the legal industry due to illegal cigarette circulation ultimately impacts the workforce. This condition, she said, has the potential to drive industries to reduce working hours or days, or even implement layoffs (PHK).
“For the workforce, specifically in the IHT sector and its related industries, the number reaches over 6 million people,” she added.
From the upstream perspective, she noted that the circulation of illegal cigarettes has also impacted the absorption of tobacco raw materials from farmers. She mentioned that stocks of raw tobacco from previous years are estimated to still be available in several tobacco factories.
“With the reduction in domestic cigarette production, stocks of raw tobacco from previous years are estimated to still be available in tobacco industry factories. Consequently, there is a potential reduction in the absorption of tobacco during harvest seasons on the upstream side,” she said.
The Deputy Head of the Jakarta Provincial Regional Revenue Agency, Elvarinsa, added that cigarette circulation is a significant contributor to regional original revenue through tobacco tax levies.
For this year, he stated that the Jakarta Provincial Government targets tobacco tax revenue of Rp1.1 trillion, but as of August 2026, only Rp444 billion has been collected. This indicates the significant pressure caused by illegal cigarette circulation.
“For the 2026 period up to August, we are experiencing a decline in tobacco tax revenue. Last year, it was Rp521 billion as of August 2025, but for August 2026, it is at Rp444 billion. This means there is a decline,” Elvarinsa revealed.
He expressed hope that strengthened enforcement against illegal cigarettes would help drive an increase in regional revenue, particularly in the tobacco tax sector.
“Hopefully, with these enforcement actions, we can increase our revenue, especially regional original revenue, specifically from tobacco taxes,” Elvarinsa emphasised.