Government raises excise tax on cigarettes
JAKARTA (JP): The government raised minimum cigarette retail prices by between Rp 12.5 and Rp 25 per cigarette, effective from July 1, in a bid to obtain larger excise tax revenue this year, Director General for Customs and Excise Tax Permana Agung said on Tuesday.
Permana said that the higher excise revenue was needed to help curb the 2001 state budget deficit to a safer level of around 3.7 percent of gross domestic product.
"The finance minister has signed the decree, and it was effective on July 1," he told reporters, after a meeting with House of Representatives commission IX on the state budget and finance.
Permana said that the minimum retail price for regular cigarettes was raised by Rp 12.5 per stick, by Rp 20 for machine- rolled clove cigarettes, and by Rp 25 for hand-rolled clove cigarettes.
"It will help us raise an additional Rp 500 billion (US$43.8 million) toward the (2001) excise tax revenue target of Rp 17.6 trillion," he said.
Since 2000, the government has raised minimum cigarette retail prices three times. Earlier in April, retail prices were raised by between 15 percent and 20 percent, and in November last year, by 20 percent. The higher retail prices the larger are excise tax receipts for the government.
Permana played down concern that the latest increase in the government-set minimum retail price would reduce cigarette demand in the country.
"We've carefully thought about it," he said.
Indonesia produced some 232 billion cigarettes last year, comprising 121.6 billion machine-rolled clove cigarettes, 86 billion hand-rolled clove cigarettes, and 25 billion white cigarettes.
Cigarette makers have usually been ranked as the country's largest corporate income tax payers.
The government uses minimum retail prices as the basis for calculating the excise tax owed by cigarette makers. But companies are allowed to set their retail prices at a higher level than the government's minimum retail prices.
Corporate secretary of cigarette maker PT Philip Morris Indonesia Geroad Yusuf told the Jakarta Post that the price of Philip Morris brands would increase by a minimum Rp 12.5 rupiah per cigarette as it produced only white cigarettes under the brand names Marlboro, Long Beach and L&M.
He said, for example, Marlboro cigarettes would be sold at a minimum price of Rp 5,250 per pack under the new scheme, from the current price of Rp 5,000.
"However, we will only be able to raise our retail prices two or three months after the government's minimum retail prices take effect, while we wait for the existing banderole (excise stamp) to go out of circulation," he said.
Geroad said that the latest increase in the minimum retail prices had caused the company to be less pessimistic about meeting this year's sales targets.
"It's difficult to make a projection now, because we have also faced many obstacles, including a depreciation of the rupiah and a worsening economic situation," he said.
Separately, Jonathan Zax, corporate development director of publicly-listed PT HM Sampoerna, one of the country's largest cigarette makers, said that the company would also raise the price of its products.
Sampoerna produces all types of cigarettes, including the A Mild, Dupont white, and Dji Sam Soe hand-rolled clove cigarette.
Zax said that under the government's new minimum retail prices, Sampoerna's cigarettes would be sold within a range of between Rp 4,900 and Rp 5,250 per pack, compared with the previous prices of between Rp 4,700 and Rp 5,000.
The share price of Sampoerna on the Jakarta Stock Exchange was down Rp 300, or 1.91 percent, to close at Rp 15,400, while Gudang Garam dropped Rp 200, or 1.54 percent, to Rp 12,800. Gudang Garam is also one of the country's largest cigarette makers
Traders said that cigarette makers and investors had been expecting a price hike since the government announced the plan earlier in June. (05)