Minimum retail cigarette prices to be raised by Rp 15 to Rp 30
Minimum retail cigarette prices to be raised by Rp 15 to Rp 30
JAKARTA (JP): Finance Minister Prijadi Praptosuhardjo said on
Wednesday that minimum retail cigarette prices that are used as
the basis for calculating excise tax would be increased by
between Rp 15 and Rp 30 per cigarette starting on April 1.
"I will sign the decree to that effect this afternoon," he
told reporters following a meeting with senior economic
ministers.
He said that the increase was meant to help meet the target
for government excise tax receipts and protect small-scale
cigarette makers.
He added that the increase would be applied to both machine-
rolled and hand-rolled cigarettes but he declined to elaborate.
The government uses minimum retail prices as the basis for
calculating the excise tax owed by cigarette makers. But
companies are allowed to set their retail prices at a higher
level than the government's minimum retail price.
Cigarette companies usually rank among the country's largest
corporate taxpayers.
The government has targeted the collection of around Rp 17
trillion in excise taxes during fiscal 2001. This sum is part of
the Rp 189 trillion in total tax receipts targeted for this year
under the state budget.
The plan to raise the minimum retail prices of cigarettes has
been the focus of debate among cigarette companies, who are also
facing rising prices for cloves which are used in the production
of local clove cigarettes.
Analysts, however, said the move to raise the minimum retail
prices, and consequently the excise tax, was expected, and would
therefore not seriously affect the net profit of large cigarette
makers such as the publicly-listed PT Gudang Garam and PT HM
Sampoerna.
The share price of Sampoerna fell by 1.35 percent or Rp 150 to
Rp 10,950 on Wednesday as the Jakarta Stock Exchange composite
index declined by 0.6 percent to 369.303. Investors were
generally cautious ahead of the appearance of President
Abdurrahman Wahid before the House of Representatives on
Wednesday (today) to respond to the Feb. 1 House censure of his
alleged role in two financial scandals.
But the share price of Gudang Garam rose by 2.99 percent or Rp
350 to close at Rp 12,050.
The increase in the minimum retail prices, however, may create
inflationary pressure as cigarettes are one of the ingredients in
the basket of goods and services used to measure the consumer
price index.
The central bank is under pressure to meet its 4-6 percent
inflation target for this year.
Already, this relatively modest inflation target is being
threatened by the government's plans to raise fuel prices in
April in a bid to reduce fuel subsidies. (rei)