`Kretek' makers oppose changes in tax system

JAKARTA (JP): Makers of kretek (clove-blended cigarettes) warned the government on Wednesday that its plan to impose excise on the basis of nicotine and tar content rather than production volume would lead to bankruptcies and mass unemployment.

The government is expected to make a new ruling in calculating the excise tax on cigarettes this week before the start of the new fiscal year on April 1.

One proposal being considered calls for the imposition of a higher tax rate for cigarettes containing more than 20 milligrams of tar and 1.5 milligrams of nicotine.

The Association of Indonesian Cigarette Producers (GAPPRI), representing clove cigarette companies, said that its members, which use locally grown tobacco, would find it impossible to adhere to the limits.

"It is just as impossible as making a tetoron (synthetic) dress out of cotton," GAPPRI chairman Ismanu Said said during a hearing with House of Representatives Commission V on communications, transportation, public works, tourism and public housing.

The director and chief financial officer of the giant kretek producer PT Hanjaya Mandala Sampoerna, Eka Dharmajanto Kasih, observed that the proposed system would favor multinational makers of regular cigarettes at the expense of local and labor- intensive producers.

GAPPRI executives have said that clove cigarette producers, which are for the most part small and medium enterprises, do not have the technology to measure tar and nicotine contents.

The association, which has 159 members, is a powerful lobby group which in the past has successfully opposed measures proposed by anti-smoking organizations.

The association says the clove cigarette industry employs 6.46 million workers and provides for as many as 20 million people, or about 10 percent of the country's population.

The industry is expected to contribute the bulk of the Rp 9.4 trillion ($1.25 billion) in excise taxes estimated for the fiscal year ending March 31. Clove cigarette exports also bring in about $55 million in revenue, the association said. (10)