Economist Criticises Cigarette Excise Layering Strategy to Combat Illicit Tobacco

The Tobacco Products Industry (IHT) remains a significant sector, contributing substantially to employment and providing approximately Rp 300 trillion annually to the state treasury. However, amidst slowing purchasing power and projected price surges in 2026, the tobacco industry continues to face challenges regarding the circulation of illegal cigarettes and high tobacco excise rates (CHT).

Piter Abdullah highlighted the planned policy to introduce new tariff layers within the tobacco excise structure, which aims to curb illegal cigarette circulation by incentivising illegal producers to transition into legal ones. Piter argues that since excise policy is intended to control tobacco consumption while simultaneously increasing state revenue, it should be implemented uniformly without a layering system.

Looking ahead, Piter encourages the strengthening of the Indonesian tobacco industry roadmap. He suggests that one essential policy would be to refrain from increasing cigarette excise, as such hikes could suppress the legitimate industry and trigger the growth of the illegal cigarette market.