DPR: Proposed Tier III Excise Policy for Illegal Cigarettes Weakens Law Enforcement

Member of the Indonesian House of Representatives (DPR) Commission III, Agung Widyantoro, has highlighted concerns over the proposed addition of a Tier 3 tobacco products excise tariff layer as a means to bring illegal cigarettes into the official system. Agung assessed that the main issue in optimising excise revenue is currently the rampant practice of illegal cigarette production and distribution, which causes state revenue leakage and creates unfair business competition. “Every fiscal policy, including adjustments to excise structure or tariffs, must continue to place law enforcement as the top priority,” Agung said in a written statement on Friday. According to him, the government needs to be careful so that the new policy being prepared does not create a perception that the state is more focused on making regulatory adjustments than on eradicating legal violations that are clearly occurring in the field. “Commission III is of the view that the basic principle of a state of law is that every violation must be processed according to applicable provisions. Law enforcement must continue indiscriminately against producers, distributors, and parties suspected of protecting or facilitating the circulation of illegal cigarettes,” said Agung. Agung views illegal cigarettes as a legal violation that must be handled through strict supervision and enforcement. Therefore, the creation of a new excise layer or various schemes linked to efforts to bring illegal operators into the official system must not be perceived as a form of compromise with legal violations. “There must be no impression that operators who previously operated illegally are granted facilities without going through an adequate legal accountability mechanism,” he said. Furthermore, Agung also reminded of the importance of maintaining a deterrent effect in law enforcement, so as not to form a perception of moral hazard in society. “The deterrent effect is one of the main objectives of law enforcement. If business actors see that violations committed can eventually be followed by a space for certain adjustments or relaxation, then there is a potential for misperception that the legal risk is lower.” “In a business sector with significant economic value such as the tobacco products industry, every policy change must be accompanied by a transparent and accountable supervisory system so as not to open opportunities for irregularities or corrupt practices,” he added. Agung requested that the government must ensure that every excise policy is not exploited by illegal operators to obtain legitimacy or new room for compromise. In addition, he stressed that policy adjustments must not eliminate the legal consequences for violations that have already occurred. “There must be no elimination of criminal liability for violations that have occurred. Periodic evaluations must be carried out to ensure that policies are not exploited as a loophole by illegal operators to obtain legal status without fulfilling the legal consequences for previous violations,” he concluded.