Purbaya confident new excise layer will effectively curb illegal cigarette circulation

Finance Minister Purbaya Yudhi Sadewa is confident that introducing a new layer in the tobacco excise tariff structure will effectively curb the circulation of illegal cigarettes.

According to him, the policy could draw illegal cigarette distribution into the legal ecosystem through excise payments at a certain tariff. Perpetrators who continue to run illegal businesses will be dealt with firmly.

“I am confident it will be effective in curbing illegal cigarettes. Because I have already met the illegal cigarette traders. I told them I would give them room. Once it is finalised, they can enter the new layer. If you still mess around, I will come down hard,” Purbaya said when met at the Parliament Complex in Jakarta on Thursday.

To date, the government is still discussing the plan to implement the new layer with the House of Representatives. The discussion will be held with House Commission XI after deliberations on the 2027 State Budget Draft are completed.

“We have not yet met with the DPR on that matter, Commission XI. We will meet Commission XI after the budget is settled,” he said.

Regarding the potential for downtrading, or a shift in consumption to cheaper cigarettes, Purbaya said this depends on market conditions and consumer preferences.

He argued that illegal cigarettes are actually cheaper, so any shift in consumption resulting from excise policy needs to be viewed more broadly.

“That depends on the market, and people have their own tastes. Illegal cigarettes are even cheaper, so where would the downtrading go? We are regulating it so they do not compete directly, so there is still a sufficient gap,” explained the State Treasurer.

It was previously reported that Finance Minister Purbaya said the government is seeking to implement an additional layer in the tobacco excise tariff structure this year. However, the policy still requires discussion and joint approval with the House of Representatives.

“For cigarette excise, we will try to implement it this year, after I speak with parliament. We have not met yet, we have not had the time. After 17 August, we will meet with the DPR to confirm the tobacco excise,” Purbaya said last Friday.

Customs and excise revenue in the 2027 State Budget Draft is targeted at Rp316.6 trillion, corrected by 1.2 percent compared with the 2026 state budget projection of Rp320.6 trillion.

Meanwhile, tax revenue is targeted at Rp2,591.4 trillion, growing 12.1 percent from the 2026 state budget projection of Rp2,310.8 trillion.

Thus, the total tax revenue target is set at Rp2,908 trillion, up 10.5 percent from the 2026 state budget projection of Rp2,631.4 trillion.