Indef: 2026 Tobacco Excise Revenue Target of Rp225 Trillion Difficult to Achieve
Senior economist at the Institute for Development of Economics and Finance (Indef), Tauhid Ahmad, has predicted that the 2026 tobacco excise revenue target of Rp225 trillion will be difficult to achieve. He made the statement during a discussion titled ‘IHT Under Pressure: High Excise, Strict Regulation, Threats to Farmers and Millions of Workers’ held in Jakarta on Friday (26/6).
‘If we look at it, this is also reflected in tobacco excise revenue, which I think is very challenging. The trend since 2022 has been declining. So if the 2026 target is Rp225 trillion, or an increase of around 6.6%, I think it is somewhat difficult,’ said Tauhid.
The prediction was not made without reason. According to him, the excise target is difficult to achieve because people’s purchasing power, particularly among the middle and lower classes, is currently under pressure. Additionally, the market share of the SKM 1 category has declined drastically compared to previous years. In 2023, for example, the market share of SKM 1 was still at 35%. Then in 2024, it plummeted to 30%.
He also added that over the last ten years (2015-2025), the prevalence of smoking has decreased from 30.08% to 28.68%. Meanwhile, for the 15-19 age group, it also declined from 10.57% to 10.48%.
‘From these indicators, it is true that most people still smoke, but the trend is declining. This means that along with the declining contribution to the economy, it is also proportional to the decrease in cigarette consumption,’ he concluded.
The Ministry of Manpower has warned of potential layoffs in the tobacco products industry as a result of the excise increase in Government Regulation 28/2024. Company efficiency measures and weakening purchasing power are the main triggers. Labour unions assess that the policy could potentially cause far greater economic consequences than the benefits claimed by the government. The planned ban on additives in cigarettes has drawn protests from the industry and labour unions, who fear it will trigger layoffs, shut down small and medium enterprises, and encourage illegal cigarettes. Behind the enforcement actions against millions of illegal cigarettes, thousands of workers are also protected from the impact of unfair business competition. The standardisation of packaging with uniform colours will eliminate the distinctiveness and brand identity that have been the main differentiators for legal products. The decision not to increase the 2026 tobacco excise rate has been welcomed by Apindo and AMTI. The Ministry of Finance’s plan not to raise tobacco excise rates in 2026 is considered a strategic step to save the tobacco products industry.