Proposal for Cheap Cigarettes Must Consider Various Aspects

Jakarta – The discourse on providing more room for the industry to produce cheap cigarettes for lower-middle-class groups has drawn scrutiny from various quarters. The proposal previously emerged after House of Representatives (DPR) Commission XI member Andi Yuliani Paris pushed for the implementation of a special excise tax for the lower-middle cigarette segment, as well as an increase in the production threshold to above 3 billion sticks per year. The idea was touted as an effort to curb the rampant circulation of illegal cigarettes. However, a number of observers believe the policy risks creating new problems, ranging from wider access to cheap cigarettes to a potential decline in state revenue from tobacco excise. Beladenta Amalia, Project Lead for the Tobacco Control Center at the Center for Indonesia’s Strategic Development Initiatives (CISDI), assessed that raising the production limit for machine-rolled cigarette groups with lower excise rates would allow more companies to remain in the low-rate tier despite increased production capacity. “If they can produce even more at a fairly low excise rate, that will certainly increase the availability of cheap cigarettes on the market,” she told reporters on Monday, 22 June 2026. According to Beladenta, this situation could hinder the optimisation of state revenue. The more producers that remain in the low-rate group, the greater the potential revenue that cannot be maximised. Currently, the excise rate for Machine-Rolled Kretek Cigarettes (SKM) Tier 1 is recorded at Rp1,231 per stick. Meanwhile, Tier 2, with a production limit of up to 3 billion sticks, is subject to a rate of Rp746 per stick. The difference between the two reaches Rp485 per stick. “This will actually be detrimental from a revenue perspective because the potential to obtain greater receipts is not achieved. And this has been evident over the last two years,” she said. A similar view was expressed by Roosita Meilani Dewi, Head of the Center of Human and Economic Development (CHED) at ITB Ahmad Dahlan. She believes that changing the production limit for the low-rate tier would actually provide greater benefits for large-scale cigarette companies. According to Roosita, companies operating near the production threshold will have more room to market cheap products without having to move to a higher tax bracket.