CHED ITB: Addition of cigarette excise tax layer inconsistent with RPJMN

Jakarta - The Center of Human and Development (CHED) at Ahmad Dahlan Institute of Technology and Business (ITB) has stated that the addition of an extra layer to cigarette excise tax is inconsistent with the 2025-2029 Medium-Term National Development Plan (RPJMN) on simplifying cigarette tax structure.

“The government should not forget their commitment in the RPJMN 2025-2029 and Presidential Regulation Number 18 of 2020, which clearly mandate the simplification of cigarette excise tax layers. The multi-layered structure will only maintain price affordability, particularly for vulnerable groups such as children and disadvantaged families,” said CHED ITB Head Roosita Meilani Dewi in Jakarta on Friday.

She noted that based on monitoring conducted by her team, even with the existing 8 layers of cigarette excise tariffs, many cigarettes are still sold at Rp10,000. Cheaper cigarettes will become more prevalent if the additional layer is implemented.

The Ministry of Finance has stated that the addition of one tariff layer aims to create space for illegal cigarette operators to transition to the legal sector. This approach is intended to ensure cigarette industry players fulfil their tax obligations to the state.

According to Roosita, illegal cigarettes should not be used as justification for this policy. The issue of illegal cigarettes is a matter of criminality and should be addressed through law enforcement, not by changing the existing excise tariff structure.

She outlined two potential impacts of this policy. Firstly, state revenue will not be optimal due to the downtrading phenomenon, whereby people switch to cheaper cigarettes to maintain their smoking habit.

Secondly, healthcare financing costs will increase due to reduced productivity, thus hindering economic growth.

“Is it even possible for the projected growth target of 8 per cent to be achieved? This is what we need to consider,” she said.

She believed that fiscal policy should prioritise public health, not merely business interests.

Finance Minister Purbaya Yudhi Sadewa plans to add one additional layer to the cigarette and tobacco excise tax tariff this year.