Lawmaker Proposes Affirmative Excise Policy for Tier-III Cigarette Manufacturers

Jakarta (ANTARA) - Member of Commission XI of the Indonesian House of Representatives (DPR RI) Said Abdullah has proposed the implementation of an affirmative policy in the form of incentives or excise tariff relief for Tier-III cigarette manufacturers. He believes this policy could encourage small and medium-scale producers to operate legally by using official excise stamps. “The high number of illegal excise cigarettes occurs because producers cannot afford the prevailing excise tariffs for Tier-III,” Said stated in Jakarta on Monday. Tier-III cigarette excise is a tariff imposed on small and medium-scale manufacturers with specific production limits, primarily applicable to Hand-Rolled Kretek Cigarettes (SKT) and Hand-Rolled White Cigarettes (SPT). Said gave an example that if the government provided an incentive in the form of a Rp300 excise tariff reduction for manufacturers operating for less than 20 years, this policy could potentially encourage them to use legal excise stamps. Consequently, state revenue from excise could increase and the business climate would become more conducive. “Based on calculations by fellow Tier-III cigarette producers, an affirmative policy could actually significantly increase excise revenue,” he said. He assessed that policymakers need to understand the characteristics of the Indonesian tobacco industry, which features diverse business scales and production levels. Said noted that the cigarette industry in several regions, including Madura, is dominated by Tier-III manufacturers with varied products and production capacities. Therefore, overly simplifying the excise tariff structure, particularly for Tier-III, could burden small and medium-scale cigarette manufacturers. He added that amidst an economic situation that has not fully recovered, the cigarette industry still contributes to state excise revenue and employment. “If the excise tariff is too simplified, especially in Tier-III, it will burden medium and lower-tier cigarette companies,” he said. Said argued that the current Tier-III excise tariff remains quite heavy for new producers, whose businesses are typically under 20 years old and lack a strong market share. Due to high excise tariffs disproportionate to their business capacity, some producers reportedly prefer using counterfeit excise stamps or committing other violations. On the other hand, Said emphasised that having multiple excise tariff layers does not automatically reduce state revenue. According to him, an increase in tobacco product production correlates directly with a rise in excise revenue. Furthermore, the number of legally operating producers could potentially increase if Tier-III excise tariffs were more affordable. “They will choose to use legal excise stamps. Supervision becomes easier, and law enforcement will also be minimised,” he said. The member of Commission XI, which oversees finance, national development planning, monetary affairs, and the financial services sector, also expressed hope that all stakeholders could encourage manufacturers still using counterfeit excise stamps to switch to official ones. He believes this goal can be achieved if the government implements an affirmative policy for Tier-III manufacturers. However, if incentives are provided and business actors still use counterfeit excise stamps, Said supports the imposition of strict legal sanctions and fines. “If affirmation has been given but they still use fake excise stamps, I agree that heavy legal sanctions and fines should be imposed,” Said concluded.