Government intensifies drive to boost excise revenue

Urip Hudiono, The Jakarta Post, Jakarta

The Ministry of Finance has teamed up with the National Police to crack down on the practice of counterfeiting excise seals on cigarette packs, which last year caused state losses estimated at Rp 150 billion (US$15 million).

The finance ministry's Director General of Customs and Excise Eddy Abdurrachman said on Wednesday his office and the police had agreed to form a task force to crack down on the offense.

"We have found cigarettes being sold using counterfeit excise seals -- some bearing no seals at all -- as well as cigarettes with inappropriate seals, such as those that are labeled with 4 percent seals when they are supposed to be using 26 percent ones," he said.

Eddy was speaking after a meeting with National Police chief Sutanto, Minister of Finance Jusuf Anwar and Minister of Industry Andung Nitimihardja, which was attended also by officials from the State Intelligence Agency (BIN) and the governors of Central Java and East Java, Mardiyanto and Imam Utomo -- the heads of two main cigarette-producing provinces where counterfeiting was widespread.

"The task force will be expected to enforce excise laws to improve the cigarette industry's compliance with regulations, to optimize state excise revenues, and most importantly, to prevent cigarette producers from getting involved in counterfeiting," Eddy said.

Eddy said estimated about 10 billion cigarette packs priced between Rp 2,900 and Rp 3,300 (33 U.S. cents), were supposed to bear excise seals between 4 and 8 percent last year.

"The counterfeiting mostly involved small-scale cigarette producers, amounting to some 5 percent of last year's cigarette production," he said. "The Indonesia Cigarette Producer Union (Gappri), however, has said it believes the numbers are higher."

Data from Gappri shows that cigarette sales in the country reached 211 billion sticks last year. The country's largest cigarette producers are Gudang Garam, Sampoerna, and Djarum, with clove cigarettes the top-selling flavor.

The government raised cigarette retail prices -- on which excise tariffs are based -- by 15 percent in July, in an effort to boost state revenues and discourage smoking among the country's 210 million population. Surveys show about 70 percent of people over the age of 18 are estimated to be smokers.

State revenues from excises as of Aug. 15 reached Rp 19.4 trillion (US$1.9 billion), up 16 percent from the same period last year.

The government has earmarked a total of Rp 31.4 trillion projected excise revenues in this year's revised state budget, but is hoping to reap in as much as Rp 33.4 trillion. State excise revenues are targeted to increase again to Rp 36 trillion next year.

Commenting on the establishment of the task force, Sutanto said the police were ready to crack down on all producers involved in counterfeiting, including major cigarette firms.