Producers may increase cigarette price

JAKARTA. Government’s decision to raise cigarette excise in 2017 is expected to drive cigarette price rise.

Under the Minister of Finance Regulation No147/2016, cigarette excise will increase in average by 10.54%, while white-machine cigarette excise will rise by 13.46%.

Head of Legal and External Affairs of PT Bentoel International Investama Tbk  Mercy Fransisca Hutahean said that the increase in excise tariff  is a burden for production process.

“The excise tariff rise will increase production cost,” said Mercy. In this case, the producers will pass on the production cost burden to consumers by increasing the cigarette price, Mercy added. However, Mercy refused to reveal the potential cigarette price rise.

Meanwhile, Indonesian Consumers Foundation (YLKI) criticized the 10.54% increase in cigarette excise in 2017. Chairman of YLKI’s Executive Board Tulus Abadi said that the excise rise is lower than 11.19% of the similar tariff increase in 2016. “We urge se government to revise the increase rate to at minimum at 20%," Tulus said.

According to Tulus, the low excise rate will not be effective to decrease cigarette consumption, whereas the primary objective of excise taxation is to discourage cigarette consumption.

Tulus added that the early decision will drive cigarette producers to jack up the productions before the policy takes into effect in 2017. In other words, the producers will be benefit from the policy. (Translator: Muhammad Farid)