Rothmans protests new excise policy
JAKARTA (JP): Cigarette producer PT Rothmans of Pall Mall Indonesia, a unit of Australia's Rothmans Holding Limited, lodged a protest on Thursday against the new cigarette excise, saying the tax would kill its business.
Company president Peter Barton said the new excise would lead to a sharp increase in the price of regular cigarettes and would kill the country's oldest cigarette brand, Kansas Plain, produced by Rothmans.
He said because of the new excise regulation, the company would have to increase the retail price of Kansas Plain cigarettes from Rp 1,000 (11 US cents) per pack to Rp 2,700 per pack in the near future, and Rp 4,500 per pack in April 2000.
"The price increase will be far too much for smokers," Barton said in a statement.
Barton said Kansas Plain cigarettes had been a favorite brand for over 50 years in Sumatra due to their cheap price. The brand has been sold at half the price of Gudang Garam kretek (clove- blended) cigarettes for a number of years.
Kansas Plain was one of the first brands produced by PT Faroka in Malang, East Java, after the company was established in 1932. The company changed its name to PT Rothmans of Pall Mall Indonesia in 1987.
Under the new excise scheme, which became effective April 1, the government will set minimum retail prices for regular, or non-clove, cigarettes and will raise the excise tax on such cigarettes to between 20 percent and 36 percent. In the past, retail price limits only were imposed on kretek cigarettes.
The Association of Non-Clove Cigarette Manufacturers has appealed to the government to review the new excise policy, saying it would cut the output of its members by 95 percent this year.
The association said the new excise tax would lead to an increase in the prices of regular cigarettes by up to 300 percent and make them uncompetitive against clove cigarettes.
Most of the country's regular cigarette producers will be forced to make massive cuts in production or stop operations, the association said.
Barton said the rise in the retail prices of non-clove cigarettes would encourage regular cigarette smokers to move to kretek brands.
"How does the government expect to achieve its revenue target by encouraging smokers to move from a brand such as Kansas Plain, which was paying 20 percent excise, to (kretek) brands with rates as low as 4 percent," Barton said.
According to Barton, excise officials have predicted Rothmans output to drop by 98 percent due to the new excise tax, but they asked the company not to shut down their business in the country.
"This logic remains a mystery to Rothmans," Barton said, adding the company invested US$100 million in the country over the past several years. (jsk)