Cigarette Excise Tax Likely Not to Increase, Industry Requests 3-Year Moratorium
JAKARTA – The plan by Finance Minister Purbaya Yudhi Sadewa to introduce a new excise tax layering scheme for cigarettes without increasing the tobacco excise duty (CHT) rates has been positively received by tobacco industry players. The policy is seen as a buffer for the industry amid pressures from declining consumer purchasing power and global economic uncertainties.
Benny Wachjudi, Chairman of the Indonesian White Cigarette Manufacturers Association, stated that the proposal provides breathing room for businesses that have faced significant fiscal burdens in recent years.
“For us, this tobacco ecosystem will receive fresh air amid the unconducive and uncertain global macroeconomic constellation,” Benny said in an official statement on Tuesday (12/5/2026).
According to him, the industry needs policy certainty to maintain business sustainability and employment absorption. Therefore, the association also proposes a moratorium on excise tax and retail selling price (HJE) increases for the next three years.
“We hope there will be no increases in excise tax and HJE for the next three years,” Benny said.
Benny noted that the decline in legal production does not automatically reduce cigarette consumption. Instead, consumption shifts to illegal products, which are now estimated to account for 14 to 15 percent of the market.
He assessed that the legal industry faces heavy pressure because it must bear various levies such as excise, VAT, and regional taxes, totaling around 70 percent of the product price.
“Normatively, no economic activity can compete with others that have production costs 70 percent cheaper,” he said.
“We welcome the Finance Minister’s statement with relief. This is not just about numbers on paper. For us, the certainty of no tax increase is good news that is directly felt on the ground,” said Sulami.
According to her, the tobacco industry involves a long economic chain, from tobacco farmers in Temanggung and Lombok, clove farmers in Maluku, to rolling workers in Central Java and East Java.
Sulami stated that the sector absorbs around 6 million workers directly and indirectly, so fiscal policy changes are seen to have broad impacts on the social and economic conditions of the community.
She also recalled that CHT rates from 2020 to 2023 increased on average by more than 10 percent per year, even reaching 12 percent for machine-made kretek cigarettes in group I in 2023. This condition is said to have pressured legal cigarette production and expanded the circulation of illegal cigarettes.
“A moratorium is not just fresh air for entrepreneurs, but a shield for the most vulnerable workers, especially rolling labourers in the hand-rolled kretek segment with the thinnest margins,” Sulami said.
Previously, Purbaya Yudhi Sadewa stated that the government is preparing a new cigarette excise layering scheme that is considered more adaptive to industry conditions, especially people’s cigarettes. After the new structure is implemented, the government emphasised that it will close all illegal cigarette factories without compromise.
“Later, after that (new excise layer) is in effect, there will be no more illegal cigarette companies that we tolerate. Once detected, shut down,” Purbaya said at the APBN KiTA press conference at the Ministry of Finance on Tuesday (5/5/2026).