Posted 27 September 2006 @ 11:56
JAKARTA, 27 September 2006 - If fuel and electricity are to escape much speculated hikes, then it's probably the turn of cigarettes to go up in price to pad state coffers. The government is considering raising next year both the retail price and excise duty of cigarettes sold in the country, the Finance Ministry's Director General for Customs and Excise, Anwar Suprijadi, said Tuesday.
The measure is needed to secure the government's increased revenue target from excise duties for the 2007 state budget to Rp 42 trillion (US$4.5 billion), Anwar said.
He declined to mention how much the planned cigarette price and excise duty increases would be, saying it was still under deliberation with the House of Representatives and the ministry's team on rates.
"But it won't be too much (of an increase)," he said. "We want to strike a balance in maintaining (the public's) purchasing power and (cigarette) production, while still generating more revenues." The timing of the hikes, Anwar added, may be "in the same month as that of the last increase, or earlier, if possible". The government last raised cigarette retail prices by 10 percent in April, following a 15 percent hike in July 2005. It did not change the current excise duties of between 4 and 40 percent.
The Finance Ministry sets different levels of minimum retail prices and excise rates for cigarettes, based on the total annual output of producers, whether the products are hand-rolled or machine-rolled, and whether they contain cloves or not. Machine-rolled cigarettes, for instance, are currently subject to a 40 percent excise, while hand-rolled are taxed at 22 percent.
The government has in its amendment of the 1995 Excise Law -- which the House is now deliberating -- also proposed raising the excise to a maximum 65 percent on the retail price of certain products, and 340 percent on their factory prices, from the 55 percent and 250 percent respectively. Excised products currently include tobacco products and alcoholic drinks.
Apart from boosting state revenues, the hikes are part of the efforts to discourage smoking among the country's 220 million population, of which surveys show that 70 percent over the age of 18 are estimated to be smokers. The Finance Ministry assessed that the last cigarette retail price hike would result in a 2 percent production drop to 219 million cigarettes this year, but an additional Rp 1 trillion in excise revenue.
The government has earmarked Rp 38.5 trillion in excise revenues for this year's revised state budget, and expects the revenues to increase again by 9 percent to Rp 42 trillion next year. It had as of August collected Rp 23.4 trillion, or 61 percent of this year's target.
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