It has been a common term that the state revenue from excise particularly from tobacco products is increased every year and become the mainstay of government to obtain quite significant revenue. Since the past several years, excise tax has become an important instrument for both central and local government because the total value is 10 percent of the total state budget. This condition makes excise revenue can affect inflation in this country (Indonesia).
This means that the increase of excise tariff for tobacco products will influence cigarettes’ price where this country has a large number of smokers. Similarly with the number of existing cigarette factories, although the number of factories has been shrinking, but state revenue from cigarette remains high.
In the Excise Law stated that cigarettes are included to goods subject to excise so that the consumption should be controlled, the distribution need to be monitored, due to the use may negatively impact the public or environment, or the use needs the imposition of state levy for justice and balance. Therefore, the growth of tobacco industry is not merely the increase of industry number, but the excise tariff will also go up that the value will be higher in every year.
Excise Tariff for Tobacco Products
For the year 2017, the government has stipulated the increase of excise tariff through the Regulation of the Finance Minister (PMK) Number 147/ PMK.010/2016, still, the stipulation of this tariff increase does not necessarily stipulate the value without asking the opinion from cigarettes manufacturers. Even, the government has been carried on some studies to stipulate this excise tariff increase.
As stated by the Head of Customs and Excise Policy, Fiscal Policy Agency (BKF), Dr. Nasruddin Djoko Surjono, the policy issued by the government has been through a process such as hearings to solicit the opinion or suggestion from related stakeholders including associations and manufacturers of tobacco products. The related Ministries (such as Ministry of Industry, Health, Labor and Agriculture) as well as academics university that the excise policy issued by the government would have considered the aspirations either from government or industries, and other related industries. For the excise policy in the year 2017, the study has been started since the beginning of the year and carried out several surveys. From various studies and discussions, it can be concluded that the increase of excise tariff is a step needed in order to control the consumption of excise.
“The increase of excise tariff in the year 2017 has been convenient with the mandate of Excise Law in order to control the consumption, minimize the negative impact on the community, as well as optimize tax revenue from excise of tobacco products sector, of which there is a revenue target on a state budget (APBN) in 2017. The government has also considered some important things like the labor protection, the tobacco industry, and the economy at large. Basically, the government recognizes that cigarettes can harm in case of it’s not the condition of the industry, but it’s about the balance.”
Further explained, the increase of excise tariff is needed to be comprehensively viewed since it can increase the cigarette tax revenue (local taxes) by 10% from excise duty, VAT of tobacco products (HT) by 8,7%, excise revenue-sharing (DBH) by 2% from excise revenue so that this policy will impact on the refund to the local government, particularly for the health allocation.
A similar thing is also stated by Sunaryo, as the Head of Sub-Directorate of Excise Tariff for Tobacco Products, Directorate General of Customs and Excise (DGCE). According to him, the excise tariff policy of tobacco products that has been issued on September 30, 2016, is the result of a long series of policy formulation process, which has been started in early 2016, or precisely in February 2016. During the last 10 months, the government has made the process of hearing, Focus Group Discussion (FGD), engine capacity survey, and comparative studies in order to complete the policy reference of tobacco excise.
“The background of excise policy is the result of the evaluation that viewed from the impact on previous excise policy for tobacco product towards the process of cigarette consumption control, employment in the tobacco industry, the distribution of illegal cigarettes, and the state revenue target on excise of tobacco products”
So, it is not true if the increase of excise tariff due to the outstanding issues which spread in these several months, of which the price of cigarettes will go up by 50 rupiah. The statement of Prof. Hasbullah Thabray from the University of Indonesia is not merely caused excise tariff increase, however, since the beginning of a year, the plan of increasing excise tariff has been touted and the manufacturers have well understood.
Then, what are the difference from the increase of excise tariff in the year 2017 and 2016? According to the Minister of Finance, Sri Mulyani, the increase of tariff increase of excise tariff for tobacco products through the PMK number 147 / PMK.010 / 2016 stated that the highest rate increase amounted to 13.46 percent for the types of tobacco products white cigarettes (SPM), and the lowest is 0 percent for tobacco products of hand rolled cigarettes (SKT) of IIIB class with the average rise of 10.54 percent.
The efforts of the government to raise excise tariff for Tobacco Products
The efforts of the government to raise excise tariff should also see the health aspect that continues echoed by society. Regarding that, the objective of the imposition of excise duty as the instrument for controlling consumption, excise for tobacco products policy that has controlled the growth of production with range +1 percent (controlled). The increase in tariff so far has been in line with the target control of tobacco products by the Ministry of Health, to reduce the prevalence of smoking by 1 percent / year with an increase of +10 percent.
This condition has been in conformity with the results of studies conducted by academics if the increase in excise tariff will affect cigarette consumption by society. Due to the increase in excise tariff on average by 10 percent would reduce cigarette consumption by 0.9 percent-2.4 percent. This tariff increase is also followed by an increase in retail selling price about 12.26 percent thus it contributes to reducing the affordability of cigarettes. It is also expected that this increase will inhibit cigarette consumption, especially the beginners or children not to take up smoking.
Meanwhile, for the sake of health, Directorate General of Customs and Excise in the last 10 years has reduced the number of cigarette factories from 4,669 factories into 754 factories in 2016. The growth in the production of tobacco had been brought under control, so that during the last 10 years, it has shown a negative trend up to -0.28 percent, of which at the same time the number of Indonesian population has grown up to 1.4 percent. This proves that the government can suppress the real cigarette consumption significantly, where the condition is consistent with the study conducted by Djutaharta in 2005 that said that there is a correlation between the increase of excise tariff and the decrease of cigarette consumption.
Another policy that still concerns the health aspect is in the form of a partial refund like funds of health allocation, or which is known as earmarking. In 2014, earmarking funds was Rp. 11.2 trillion, in 2015 is Rp. 15.14 trillion, and in 2016 is estimated by Rp. 17 trillion.
Excise Tariff for Tobacco Products – Temporaktif