Govt to amend excise law, raise rates

Govt to amend excise law, raise rates

Rendi A. Witular, The Jakarta Post, Jakarta

The government is aiming to boost state revenue from excise duty
in the immediate future by amending existing excise law. The
proposed law will see a rise in maximum excise rates and an
expansion in the categories of goods that will be subject to
excise.

Director General of Customs and Excise Eddy Abdurrahman told
The Jakarta Post that his office was preparing a draft revision
to Law No. 11/1995 on excise aimed at reforming the excise system
as well as increasing state revenue.

"We are currently in the process of drafting the revision. We
expect to deliberate this matter with lawmakers in the second
semester of this year, and put the revised law into effect
starting next year," said Eddy late on Monday.

Eddy estimated that the revised law would help increase excise
revenues on average by more than 5 percent per year over the next
five years.

The revision would include an increase in the maximum excise
duty from the current 55 percent to 65 percent for local and
imported goods that are subject to excise and sold at retail
level.

Other revisions would cover the expansion of categories of
goods that are subject to excise duty, such as compact disks,
video compact disks, and digital video disks, Eddy said.

"The government had initially planned to impose the excise
duty on these three products to help boost excise revenues
sometime this year. However, we decided to postpone it until next
year in light of intense resistance from the industry due to the
absence of any legal basis," he said.

Under existing excise law, there are only three types of goods
that are subject to excise -- tobacco products and cigarettes;
liquor; and alcohol and ethanol ethyl.

Tobacco products and cigarettes account for some 95 percent of
the country's excise revenues, with the remaining 5 percent being
contributed by the other two.

Under the 2005 state budget, the government has set a Rp 28.9
trillion (US$3.42 billion) excise revenue target, up 4.3 percent
from the Rp 27.7 trillion last year.

The government has not raised excise rates, especially for
tobacco products and cigarettes, since last year, which has
caused a decline in revenues.

Cigarette production this year was estimated to reach 213.15
billion sticks, up 5 percent on last year's 203 billion sticks,
due primarily to higher consumer purchasing power and anticipated
higher economic growth.

Eddy said that the rise and fall in excise revenues was always
related to how the government regulated the country's tobacco and
cigarette industry, given its disproportionate contribution to
total revenues.