Excise revenue target for 2003 unattainable: GAPPRI

Excise revenue target for 2003 unattainable: GAPPRI

Dadan Wijaksana, The Jakarta Post, Jakarta

The Association of Indonesian Cigarette Producers (GAPPRI) has
appealed to the government to lower its excise revenue target for
next year as the industry has been hit by weakening market
demand.

GAPPRI chairman Ismanu Soemiran said on Tuesday that the
domestic cigarette industry had been reducing production because
of weaker demand.

"The government must be realistic," he told The Jakarta Post.

He said that forcing cigarette companies to pay more in excise
would lead some to go under and cause more layoffs because of the
current business downturn.

The government, in its draft 2003 state budget, plans to rake
in some Rp 27.6 trillion (around US$3.4 billion) in revenue from
excise, of which Rp 25.9 trillion -- or around 94 percent -- is
expected to come from cigarette sales.

The figure is an increase from this year's total excise target
of Rp 22.3 trillion.

The rise in excise revenue was in line with the government's
plans to boost tax income next year -- totaling Rp 260 trillion,
an 18.7 percent increase from this year's target of Rp 219
trillion.

According to Ismanu, the increased excise revenue target for
next year was proof that the government had turned a blind eye to
the cigarette industry's current difficult situation.

Ismanu added that weaker demand for cigarettes had partly been
partly caused by a sharp increase in the price of the products.

Since last year, the government has raised the retail price of
cigarettes in a bid to obtain greater excise revenue.

However, the policy seems to have been ineffective, as excise
revenue obtained during the first semester of this year only
reached Rp 9 trillion, falling short of the Rp 11 trillion
target.

There are currently 799 cigarette producers throughout the
country, divided into three categories: large, medium-sized and
small companies, with a combined total production capacity of
some 206 billion cigarettes per year, absorbing more than 200,000
workers.

Of the total, some 700 companies fall into the third category.
"It is employees working at these small companies who are
threatened if the decline in demand continues. And the
government's plan to increase the excise target will only make it
worse," Ismanu added.

He said that production had dropped by 20 percent during the
first half of this year due to weaker demand.

As stated by President Megawati Soekarnoputri when unveiling
the draft 2003 state budget, an increase in tax revenue would be
crucial for budget financing as tax income accounts for around
three fourth of total state income, estimated to be Rp 327
trillion.