Cigarette Tax and Illicit Cigarettes

The controversy over cigarette consumption and its ripple effects must not be taken lightly.

Makassar (ANTARA) – The ‘Smoking Kills’ tagline is always displayed on legal cigarette packaging. Illicit brands also boldly use the same tagline to mimic legitimate products sold in the market.

Over the years, the circulation of illicit cigarettes — offering diverse flavours and lower prices compared to taxed legal cigarettes — has increased due to technological support and evasion tactics by smugglers.

Amidst the excise tax challenges and efforts to trace the link between illicit cigarettes and the tobacco industry’s growth strategies, a simple question emerges — yet raises many big concerns: if national cigarette production continues to decline, why does consumption remain high?

Data from the Directorate General of Customs and Excise shows cigarette production in 2024 was around 244 billion sticks, a 5.52% drop from the previous year. Production fell further by approximately 25 billion sticks in January-August 2025.

Roosita Meilani Dewi, Chair of the Centre for Human and Economic Development (CHED), said these figures clash with consumption data from Indonesia’s 74.9 million adult smokers. If they smoke an average of 12 sticks per day, annual consumption for this group alone would reach about 328 billion sticks.

This does not include the 5.9 million underage smokers, who consume an average of 8-12 sticks daily, leading to an estimated annual consumption of 25 billion sticks.

‘When combined, total consumption could be 350-360 billion sticks. If official production is only around 244 billion, where does the rest come from?’ said Roosita, who is also a lecturer at Ahmad Dhani Institute of Technology and Business.

This question points to a long-standing suspicion shadowing the national tobacco industry: illicit cigarettes.

Previously, the government seized hundreds of millions of illicit cigarettes in 2024. Estimates suggest around 14% of cigarettes in the market are illegal or non-compliant with excise regulations.

This phenomenon is becoming increasingly difficult to control as legal cigarette prices rise, while cheaper alternatives remain readily available.

The situation is complicated by advances in cigarette manufacturing technology. Modern rolling machines can produce up to 8,000 sticks per minute, meaning large-scale production no longer requires as much labour due to mechanisation.

As a result, a decline in production by major companies does not necessarily mean overall consumption falls. Some market players believe demand has shifted to cheaper products, including illicit cigarettes. Meanwhile, the government faces a dilemma.

According to Roosita, policies to restrict cigarette consumption are being tightened through higher excise duties and health regulations. Yet, government revenue from tobacco excise remains a key source of national budget funding.

This situation has sparked criticism over inconsistent law enforcement. Those violating regulations should be prosecuted; there must not be a perception that violations are being tolerated.

This issue, Roosita argues, is not just about cigarettes but a broader challenge involving oversight, fiscal policy, public health protection, and the future direction of the national tobacco industry.

Behind all these figures, one unanswered question remains: where do the billions of unaccounted cigarette sticks go?

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