'Excise target unlikely to be achieved'

The Jakarta Post, Jakarta

The Customs and Excise Office will be unable to meet this year's excise revenue target as a result of declining cigarette sales caused by weakening demand, Director General of Customs and Excise Eddy Abdurrachman said on Friday.

"Cigarette output is forecasted at 186 billion cigarettes this year, as compared to 204 billion in 2002. There will mean a loss of around Rp 1 trillion to Rp 1.5 trillion in potential excise revenue," Eddy told reporters.

The government had targeted a Rp 27.95 trillion (US$3.41 billion) excise revenue target for this year. Some 90 percent of the revenue is contributed by the cigarette industry, with the liquor industry contributing the remainder.

As of the end of June, the office had collected around Rp 11.1 trillion in excise revenue, which represents only around 40 percent of the target.

The total state budget revenue for this year is targeted at Rp 366.1 trillion, of which Rp 201.4 trillion is contributed by tax revenue.

A shortfall in the excise revenue would force the government to seek other funding sources, which may not be easy to find particularly amid the current weak economic conditions.

The declining domestic cigarette sales has been largely attributed to the weakening purchasing power of consumers following the increase in electricity rates and fuel prices.

Eddy also said that the government's move to raise the cigarette excise tariff during the past couple of years had contributed to the decline in sales as cigarette producers had passed on the higher cost to customers.

"This has contributed to the falling sales. While some smokers used to purchase two packs (of cigarettes) a day, now they can only afford one," Eddy said.

The office has also said it was having difficulties in collecting excise revenue from alcoholic drinks, due to policies in certain provinces or regencies banning the sale of such products mainly for religious reasons.

Meanwhile, Eddy expressed optimism that the revenue target from import duty could be achieved on the back of stronger import activities in the second semester of this year. In the first half, the office had collected around Rp 6 trillion, compared to the full-year target of Rp 11.9 trillion.

Elsewhere, Eddy said that his office was preparing a policy aimed at streamlining customs procedures in a bid to help boost investment in the country.

Box

Excise revenue collection

1999 Rp 8.6 trillion 2000 Rp 11.3 trillion 2001 Rp 16.4 trillion 2002 Rp 20.4 trillion 2003* Rp 27.9 trillion

* target