Rini campaigns against higher cigarette excise

Rendi A. Witular, The Jakarta Post, Jakarta

Minister of Trade and Industry Rini MS Soewandi is seeking support from legislators for her plan to persuade Minister of Finance Boediono to cancel cigarette excise increases.

Rini argued Wednesday that forcing cigarette companies to pay more excise would cause some to go broke and cause more layoffs because of the current business downturn.

"I beg support from the Commission V members to revoke the plan made by the Ministry of Finance to increase the excise on clove cigarettes. I prefer the increase to be imposed on non- clove cigarette manufacturers," she said during a meeting with the House of Representatives Commission V overseeing trade and industry affairs.

Rini said non-clove cigarette makers deserved to be taxed at a higher rate as the raw materials for the products were mainly imported. By so doing, legislators could protect the domestic cigarette industry which mainly produced clove cigarette.

The government, in its draft 2003 state budget, is counting on Rp 27.6 trillion (around US$3.4 billion) in revenue from excise, of which Rp 25.9 trillion, or about 94 percent, is expected to come from cigarette sales.

The figure is an increase on this year's total excise target of Rp 22.3 trillion.

The rise in excise revenue is in line government plans to boost its tax revenues next year to Rp 260 trillion, an 18.7 percent increase on this year's target of Rp 219 trillion.

The government raised the retail price of cigarettes last year in a bid to obtain greater excise revenue.

However, the policy seems to have been ineffective, as excise revenue obtained during the first semester of this year only totaled Rp 9 trillion, far short of the Rp 11 trillion target. The higher excise has caused sales volumes to drop by around 20 percent during the first half of this year, experts have said.

Meanwhile, Directorate General of Customs and Excise excise director Djunaeidy Djusan told The Jakarta Post that there would be an increase in cigarette excise as the government planned to increase its excise revenue target for 2003.

"The figure of the increase for cigarette excise will be announced in October, and it will be put into effect in November this year," Djunaeidy said.

The Directorate General of Customs and Excise comes under the umbrella of the Ministry of Finance.

Djunaeidy added if Rini disagreed with the policy, her complaints should be addressed to House Commission IX instead of Commission V.

House Commission IX, which oversees the state budget and financial affairs has the direct authority to control finance ministry policy concerning tax and excise, he said.

The Association of the Indonesian Cigarette Producers (GAPPRI) earlier claimed the country's cigarette output could decline 30 percent to 40 percent this year due to the weak demand caused by the increased retail price.