Govt raises cigarette prices and excise taxes

JAKARTA (JP): The government will raise the excise taxes on cigarettes by between four and eight percentage points and their minimum retail prices by 10 percent on April 1, Minister of Finance Bambang Sudibyo said on Wednesday.

"I signed the decree this morning," Bambang told reporters at a Cabinet meeting.

According to the decree, the excise tax on hand-rolled and machine-rolled clove and nonclove cigarettes will increase by four percentage points for companies with an annual output above six billion cigarettes.

Thus, the excise tax on machine-rolled cigarettes produced by such companies rose to 40 percent from 36 percent, while the excise tax for hand-rolled cigarettes produced by such companies increased to 20 percent from 16 percent.

Under the decree, nonclove cigarette makers with an annual output of above six million cigarettes will have to pay an excise tax of 40 percent, up from 36 percent.

According to the decree, the excise taxes payable by medium- and small-sized clove and nonclove cigarette makers will increase by eight percentage points.

Thus, the excise tax for machine-rolled clove cigarettes made by middle-sized companies with an annual output of between 2 billion and 6 billion cigarettes and with a minimum retail price of Rp 250 rupiah (3.2 U.S. cents) per cigarette, was raised to 38 percent; and to 36 percent for cigarettes priced between Rp 165 and Rp 245 a cigarette.

The excise tax on machine-rolled clove cigarettes made by small-scale companies with an annual output of less than 2 billion cigarettes and a minimum retail price of Rp 250 was raised to 36 percent; to 34 percent for cigarettes priced between Rp 165 and Rp 245; and to 28 percent for those priced between Rp 120 and Rp 160.

The excise tax on hand-rolled clove cigarettes made by medium- sized companies and priced at a minimum of Rp 165 per cigarette rose to 18 percent; and to 16 percent for those priced between Rp 110 and Rp 160.

The new decree sets the excise tax for hand-rolled clove cigarettes made by small-scale companies with a minimum price of Rp 165 at 16 percent; at 14 percent for cigarettes priced between Rp 110 and Rp 160; and at 12 percent for those priced between Rp 80 and Rp 105.

The excise tax for regular (nonclove) cigarettes made by medium-sized companies with a minimum price of Rp 150 was increased to 38 percent and to 36 percent for cigarettes priced between Rp 100 and Rp 145.

Under the decree, small scale nonclove cigarette makers with a minimum retail price of Rp 150 per cigarette will pay an excise tax of 36 percent, while those selling their products at between Rp 100 and Rp 145 will pay an excise tax of 34 percent.

The excise tax for small scale nonclove cigarette makers with a minimum retail price of between Rp 70 and Rp 95 percent was set at 28 percent.

Bambang said the government intentionally imposed higher tax increases on cigarettes produced by small and medium size companies than those produced by big companies with the future goal of "creating uniform excise taxes".

"Thus, we hope they (the cigarette producers) will get closer to each other in terms of prices," Bambang said.

Also under the decree, the minimum retail prices for machine- rolled and hand-rolled clove cigarettes were increased by 10 percent across the board.

The decree also requires regular cigarette producers to raise their minimum retail price to narrow the price gap between their products and clove cigarettes.

Thus far, the minimum retail prices for regular cigarettes has been set at 45 percent of those for clove cigarettes. But, the decree raised the retail price ratio to 60 percent. (jsk/prb)