Gaprindo calls for cigarette tax review

JAKARTA (JP): The Association of Non-clove Cigarette Manufacturers (Gaprindo) appealed to the government on Saturday to review the new cigarette excise tax, claiming it would cut the output of its members by 95 percent this year.

Association chairman Muhaimin Moefti said the excise tax scheme effective April 1 would lead to a sharp increase in the prices of regular cigarettes and make them uncompetitive against clove cigarettes.

"Under the new tax scheme, retail prices of white (regular) cigarette will increase by up to 300 percent in one or two years," he said in a release.

Most of the country's regular cigarette producers will be forced to make massive cuts in their production or probably stop operation, he warned.

Muhaimin said the government should review the new tax policy and introduce a consumer-oriented tax system which would bring benefits to cigarette manufacturers, consumers and the government.

Under the new tax scheme, the government sets minimum retail prices for regular cigarettes. The limit, previously imposed only on clove-blended cigarettes, would force the so-called "white" cigarette producers to push up their prices.

Under the new tax scheme, there would be a 36 percent excise tax on machine-rolled clove and regular cigarettes produced by big companies and with a minimum retail price of Rp 225 (2.5 US cents) per cigarette.

There is a 30 percent excise tax on machine-rolled clove and regular cigarettes produced by medium-size companies, with a minimum price of Rp 180 per cigarette. A 28 percent excise tax would be imposed on similar cigarettes if the price was between Rp 150 and Rp 175 per cigarette.

The ministry imposes a 22 percent tax on machine-rolled clove and regular cigarettes made by small companies, with prices between Rp 130 and Rp 145 per cigarette. A 20 percent tax is, however, tagged for similar cigarettes that sell for between Rp 110 and Rp 125.

For hand-rolled cigarettes, the government imposes a 16 percent excise tax for those produced by big companies and a minimum per cigarette price of Rp 150.

For hand-rolled cigarettes made by medium-sized companies with prices ranging between Rp 100 and Rp 145, the tax is 8 percent, while tax on hand-rolled cigarettes produced by small firms, with prices ranging between Rp 10 and Rp 95, is 4 percent.

Indonesians smoke 202 billion cigarettes per year, almost 90 percent of which are clove cigarettes. (jsk)