Purbaya Proposes Legalisation of Illegal Cigarettes, Economists Demand Clarity on Sanctions and Excise Reforms

JAKARTA, KOMPAS.com - Plans by Finance Minister Purbaya Yudhi Sadewa to incorporate illegal cigarette players into the legal industry to boost state revenues have drawn critical notes from economists. Economist Piter Abdullah views the policy as well-intentioned but potentially problematic if not designed comprehensively. “The intention is good, but the question is, what about the illegal cigarette cases so far? Are they just forgiven? Pretended not to exist?” Piter told Kompas.com on Monday (20/4/2026). However, Piter reminds the government not to focus solely on revenue aspects but also on law enforcement that has been ongoing. Piter states that without clarity, the policy risks creating moral hazard and signalling that violations can simply be wiped away. Furthermore, Piter believes a thorough study is needed to assess the impact of this policy on the overall tobacco industry. The entry of new players through legalisation could alter the competitive structure in that industry. “I think the good intention needs to be explained in detail. How will past legal violations be followed up?” he said. According to Piter, without addressing the root problems, namely the excise policy design, legalising illegal cigarettes could become a short-term solution that does not resolve the main issues. “There also needs to be a study on how it impacts the overall tobacco industry when new players enter. What about the excise system that has been considered too burdensome, which is seen as the cause of illegal CHT?” he said. The government has now completed the policy proposal and will soon discuss it with the DPR before implementation. Purbaya emphasises that legalisation does not mean legitimising illegal practices, but rather encouraging business actors to enter the official system with obligations to pay excise. According to Purbaya, this policy aims to expand the state revenue base from the excise sector while giving illegal cigarette business actors the opportunity to transition to the legal market. However, he has not detailed the potential additional state revenues from this policy. The government prefers to observe the implementation impacts first before drawing conclusions. “Soon to discuss with the DPR how best, but the proposal is already finished. Hopefully, it can be accepted by the DPR, then we will implement it,” Purbaya said at the Attorney General’s Office on Friday (10/4/2026).