IYCTC: Addition of Tobacco Excise Tax Layer Obstructs 8 Per Cent GDP Growth Target
Jakarta - The Indonesian Youth Council for Tactical Changes (IYCTC) has stated that adding a new layer to the tobacco excise tax (CHT) risks obstructing Indonesia’s 8 per cent economic growth target, as it could expand cigarette access among young people who form the foundation for achieving this objective.
IYCTC Programme Manager Ni Made Shellasih explained that achieving the growth target depends fundamentally on a healthy and productive labour force. However, cigarettes are addictive products that cause chronic diseases and long-term health burdens.
“A tax structure that creates room for lower prices will increase cigarette access among children and teenagers, who are actually the most price-sensitive group. The more flexible prices become in the market, the easier it is for young people to access these addictive products,” she said in Jakarta on Friday.
She noted that Indonesia still faces high rates of youth smoking prevalence, and fiscal policy should therefore strengthen protections for children and young people from the dangers of smoking.
She also highlighted a pattern of massive and intensive industry intervention from various quarters aimed at obstructing efforts to control cigarette consumption in Indonesia. According to her, flooding the market with cheap cigarette options is the fastest way to undermine human resource quality.
“We have observed a consistent pattern in recent months. When the legal industry raises objections to rate increases and subsequently proposals emerge for adding a layer with lower rates, policy direction actually shifts. This demonstrates the strong influence of business interests in tobacco excise tax policy dynamics,” said Shella.
She also questioned the stated rationale of the policy plan, which aims to address the issue of illegal cigarettes. According to her, the illegal cigarette issue should be resolved through law enforcement, not by shifting it into a matter of rate compromise.
Shella stated that if violations such as these are met with incentives in the form of lower rates, a dangerous narrative will emerge—that violations can be committed because negotiations are easily conducted.
Finance Minister Purbaya Yudhi Sadewa plans to add one layer to the tobacco excise tax (CHT) or cigarette tax this year.
“We will ensure one new layer perhaps; this is still being discussed,” Purbaya told journalists in Jakarta on Wednesday (14 January).
Purbaya explained that adding one tax bracket aims to provide room for illegal cigarette producers to transition to the legal channel. This approach ensures that tobacco industry players fulfil their obligations to pay taxes to the state.