Regencies demand cigarette excise

Rendi A. Witular, The Jakarta Post, Jakarta

The country's main cigarette-producing regencies sought support on Monday from the House of Representatives for their proposal on the distribution of cigarette taxes.

The regencies announced they direly needed some of the revenue generated by the tax, because, unlike other regencies, they lacked natural resources as alternative sources of income.

The regencies demanded 10 percent of cigarette taxes.

"We have no natural resources at all. The only source of income for us is from cigarette factories," Kudus Regent Munadjat said, during a meeting with the House of Representatives Commission IX on financial and development planning affairs.

Kudus is home to one of the country's largest cigarette producers, PT Djarum Kudus, which, according to Munadjat, pays Rp 10 billion a day in tax to the central government.

Also present at the meeting was the regent of Kediri, which is home to PT Gudang Garam, and the vice mayor of Surabaya, which is home to PT HM Sampoerna. The three areas are located in East Java province.

Following the implementation of the autonomy law by the government last year, the regions have been seeking ways to explore additional sources of income.

Intergovernmental Fiscal Balance Law No. 25/1999 only rules on the distribution between the regional and central governments of earnings from natural resources, such as oil, gas, mineral resources, fish and forests.

This has disappointed many regencies that lack natural resources.

In response, legislators said they would discuss the issue with Minister of Finance Boediono.

Boediono, who was first scheduled to participate in the meeting, failed to appear. He was represented by the director general of tax and excise, Permana Agung, who claimed to have no right to decide on the issue.

Under the state budget, the government expects to collect Rp 22.35 trillion (US$2.4 billion) in excise, including Rp 21.85 trillion from cigarette taxes.

As of the end of June, only Rp 9 trillion had been collected from cigarette taxes, from a target of Rp 11 trillion.