Eradicating Illegal Cigarettes is Urgent: Untaxed Production Erodes State Revenue
REPUBLIKA.CO.ID, JAKARTA — Efforts to eradicate illegal cigarettes are deemed increasingly urgent amid indications of excise stamp misuse that could harm the state in large amounts. The practice of producing and distributing cigarettes without excise not only violates the law but also erodes state revenue from the tobacco excise sector.
Industry observer Chabibi Syafiuddin views the issue of illegal cigarettes not as mere administrative violations. He states that such practices have a direct impact on the stability of state revenue while creating distortions in the tobacco industry.
“The KPK and PPATK have moved on the upstream side and fund flows, but eradicating illegal cigarettes must touch production and distribution, which are the main sources of state losses,” said Chabibi in his statement on Sunday (12/4/2026).
According to him, the presence of excise stamps that do not match production capacity indicates unfair practices in industry governance. This condition potentially opens the door for the widespread circulation of illegal cigarettes.
“If excise stamps circulate not in accordance with production capacity, it means there is potential for systemic distortion. The impact is not only on industry governance but also on state revenue that should be optimised,” he said.
Chabibi emphasised that illegal cigarettes are physical goods with clear production and distribution chains, so their crackdown can have a significant impact in curbing the circulation of illegal goods while restoring the potential for state revenue.
He added that illegal cigarette production is the main node in this issue. As long as untaxed production continues, the potential for state losses will persist and be difficult to suppress comprehensively.
“Eradicating illegal cigarettes must be done comprehensively from upstream to downstream. If illegal production is still running, then regulatory efforts on the administrative side alone will not be sufficient,” said Chabibi.
In addition to impacting state revenue, the circulation of illegal cigarettes also creates unhealthy business competition. Businesses that comply with excise rules are potentially disadvantaged because they must compete with illegal products sold at cheaper prices.
It is known that the investigation currently being conducted by the Corruption Eradication Commission (KPK) is directed at allegations of excise stamp misuse in East Java. The tracing covers patterns of fund flows and the involvement of several business actors in practices alleged to occur systematically.
Several names of small and medium enterprise-scale cigarette entrepreneurs in the East Java region are reported to have entered the radar of case deepening. Among them are entrepreneurs in Pamekasan, Malang, to Sumenep.
Strengthening law enforcement against illegal cigarettes is seen as an important step not only to regulate the industry but also to maintain the optimisation of state revenue from the tobacco excise sector, which has long been one of the main sources of income.