Cigarette Excise Tariff Rises 12.5% in 2021

JAKARTA. The government increases the tariff of excise tax on tobacco products by an average increase of 12.5% per stick, starting in 2021. The increase occurred in all categories of Machine-made Rolled Clove Cigarettes (Sigaret Kretek Mesin/SKM) and Machine-made White Cigarettes (Sigaret Putih Mesin/SPM), while the excise tariff for Handmade Cloves Cigarettes (Sigaret Kretek Tangan/SKT) remained.

Based on the explanation of the Minister of Finance Sri Mulyani, the lowest increase in excise tariff on tobacco products was in the SKM IIA category of 13.8% or an increase of IDR 65 per stick from the current tariff of IDR 470 per stick. Meanwhile, the highest increase occurred in the SPM I category at 18.4% or IDR 85 per stick from the current tariff of IDR 790 per stick.

The following are details of the excise tariffs on tobacco products that will take effect in 2021:

Tobacco excise tariffs of SKM group:

• SKM I IDR 865 per stick (increased by 16.9%)
• SKM IIA IDR 535 per stick (increased by 13.8%)
• SKM IIB IDR 525 per stick (increased by 15.4%)

Tobacco excise tariffs of SPM group:

• SPM I IDR 935 per stick (increased by 18.4%)
• SPM IIA IDR 565 per stick (increased by 16.5%)
• SPM IIB IDR 555 per stick (increased by 18.1%)

Tobacco excise tariffs of SKT group:

• SKT IA IDR 425 per stick
• SKT IB IDR 330 per stick
• SKT II IDR 200 per stick
• SKT III IDR 110 per stick

Suppressing The Consumption

Through this policy, the government hopes to see a reduction in the number of cigarette consumers, particularly among children and women.

With higher excise rates, the retail price of cigarettes is projected to be less affordable, indicated by an increase in the affordability index from 12.2% to 14%.

Thus, the prevalence rate or portion of smokers in society as a whole can fall from 33.8% to 33.2%. While the prevalence rate of the group of children with the age range of 10-18 years dropped to 8.8% up to 8.9%

"The government hopes that our cigarette production can become an export commodity, not for domestic consumption," said Sri Mulyani, Thursday (10/12).

The government believes that this policy will have an impact on the cigarette industry, but will not put pressure on the economy in general.

It is because the increase only applies to cigarette companies that are machine-based, so it will not interfere with the number of existing jobs.

In addition, in determining this policy the government also considers the fate of tobacco farmers.

Read: Government Exempts Ethyl Alcohol Excise for Sanitizers

Narrowing the Tariff Gap

In addition to increasing tariffs, the policy issued is also intended to reduce the differential in rates from one group to another. This is done to signal to business actors that the policy of excise tariffs on tobacco products
leads to simplification of the tariff structure.

Previously, the government had intended to simplify the structure of the excise tariff on tobacco products by reducing the number of tariff groups as it is currently done. However, this policy cannot be implemented drastically.