Sampoerna concerned about rising tobacco excise

JAKARTA. Indonesia’s largest cigarette producer, PT HM Sampoerna, has expressed concern about the rising excise on tobacco products starting next year, saying the move will burden the company’s and the overall industry’s performance.

Sampoerna president director Paul Norman Janelle said the tax hike would weigh on the cigarette industry. However, he appreciated the government decision to keep the excise on hand-rolled cigarettes (SKT) unchanged at Rp 80 (US$ 0.01) per cigarette.

"The government should listen to the concerns of the industry and cut its excise target. Finance Minister Bambang [Brodjonegoro] has given consideration to the [excise] tax rate in the SKT segment. I am very pleased with the results in the final state budget," Janelle said at the Investor Summit and Capital Market Expo 2015 in Jakarta on Friday.

According to the executive, the current economic slowdown has challenged the tobacco industry. Looking ahead, he projected Sampoerna's performance would be stagnant.

"Indeed, there are ups and downs, [lots] of challenges, but we focus on improving performance. Maybe the industry is still going flat. We will continue to compete. Currently, A Mild [product] still leads," he explained, adding that the company had yet to decide on whether to increase prices.

Controlled by Philip Morris, which owns more than 90 percent of the shares, Sampoerna is the largest listed company in Indonesia (in terms of market capitalization) after issuing new shares worth Rp 20 trillion.

The government announced an increase in the tobacco excise by an average of 11.19 percent, starting on Jan. 1, 2016, after taking into account both the conditions of the cigarette industry and public health concerns.

The highest tax increase of 12.96 to 16.47 percent will apply to machine-rolled cigarettes, while the lowest increase of 0 to 12 percent will apply to hand-rolled cigarettes.

The government would not increase taxes on certain hand-rolled cigarettes because of their slower production rate in comparison to machine-made cigarettes, said the Finance Ministry’s director general of taxation, Heru Pambudi.

Tobacco is still one of the leading sources of excise revenue. This year, the government has set a target of Rp 139.12 trillion (US$10.29 billion) in revenues from tobacco products.

The 2016 state budget banks on total excise revenues of Rp 155.52 trillion, which includes Rp 148.86 trillion from tobacco products and Rp 171.2 billion from liquor. (Ayomi Amindoni)