Labour Unions Protest New Excise Tax Layer on Cigarettes, Deemed to Increase Pressure on Workers
Workers in the legal cigarette industry are deemed to face increased pressure from the proposal to add a new layer or category to the cigarette excise tax structure.
Amid an unstable economic situation, labour unions have reminded that policies on legalising illegal cigarettes should not weaken the labour-intensive sector, especially on the occasion of Labour Day on 1 May.
Chairman of the Federation of Tobacco Food and Beverage Workers’ Union - All-Indonesia Workers’ Union (RTMM-SPSI), Hendry Wardana, stressed that the main issue the government needs to address now is the proliferation of illegal cigarettes.
He explained that in the market structure, there are legal cigarettes that comply with excise payments and labour obligations, and illegal cigarettes that do not pay excise and lack certainty in worker protection.
“Every illegal cigarette produced will definitely result in the loss of one job in the official cigarette sector,” said Hendry in his statement on Friday, 1 May 2026.
In 2025, national cigarette production was reported to reach 307 billion sticks, a 3% decline from 2024 production of 317 billion sticks. Excise revenue (CHT) in 2025 was also recorded to have fallen for the first time to Rp 212 trillion, compared to the 2024 achievement of Rp 216 trillion.
Meanwhile, according to CISDI, illegal cigarettes controlled 13.9% of the market in 2025, up from 6.9% in 2023. In this context, Hendry views the new layer proposal as not aligned with the spirit of eradicating illegal cigarettes.
“If so far the non-compliant ones are given a special layer with lower rates than the legal industry, where is the government’s justice towards the industry that complies with regulations?” he said.
Similar concerns were voiced by the Chairman of the All-Indonesia Workers’ Union Confederation (KSPSI) in Kudus Regency, Andreas Hua. According to him, a policy approach that overly pressures the industry could trigger factory closures and mass layoffs.
“Business owners might still survive. But what about the workers? The average education of cigarette workers is primary and junior high school, with only about 20% having senior high school. Is there another labour-intensive sector ready to absorb them? So far, there isn’t,” said Andreas.
Andreas reminded that the majority of workers in this sector have limited educational backgrounds, making it difficult for them to switch to other sectors if the industry continues to be pressured.