Govt meets revenue target on cigarette production

Urip Hudiono, The Jakarta Post, Jakarta

The government has booked a higher-than-expected excise revenue this year due to strong cigarette production, but is seeing lower revenue from its customs service in the face of a recent slowdown in imports and greater import duty cuts.

The finance ministry's Director General of Customs and Excise, Eddy Abdurrachman, said on Wednesday state revenue from excise had for the full year of 2005 amounted to Rp 33.05 trillion (some US$3.3 billion), higher than a target of Rp 32.24 trillion.

State revenue from customs, however, is estimated to reach only Rp 14.86 trillion, from a target of Rp 16.59 trillion.

"The figure for the excise revenue is final until the end of the year, as all excise payments are done two months ahead," he said.

Eddy explained that the higher excise revenue was mainly the result of this year's higher-than-expected cigarette production, which reached 220 billion cigarettes, or up 8 percent from 203 billion cigarettes last year.

This is despite the government's decision to raise in July the retail price of cigarettes by 15 percent, raising concerns from industry players that domestic cigarette production might slump to only 200 billion cigarettes as a result. The government had at the time estimated that the price hike would only decrease production to 214 billion cigarettes.

A cigarette retail price rise will enable the government to generate more money as the excise duty it charges on cigarette manufacturers is based on the final retail price.

Meanwhile, on the lower customs revenue, Eddy said that this was due to a declining trend in imports as the year wraps up.

"We have also given incentives in the form of import duty cuts -- some to 0 percent -- to several industries in accordance with our tariff harmonization policy," he said.

Imports in October declined by 2 percent to $4.79 billion from September, although between January to October it has still shown a 29 percent increase to $48.63 billion as compared to the same period last year.

The government has through its tariff harmonization policy given duty cuts to several imported products in line with its multilateral and bilateral free trade agreements.

Customs and excise revenue makes up nearly 14 percent of the government's Rp 351.97 trillion in total state revenue from taxation for this year. The government has estimated that it may miss this target by some 1 percent.

For next year, the government is expecting Rp 36.52 trillion in excise revenue and Rp 16.57 trillion in customs revenue, making up Rp 416.31 trillion in total tax revenue.