The BPS Admits Cigarette Excise Increase Affects Inflation: The Transmission Is Gradual

JAKARTA - The Central Statistics Agency (BPS) admits that the increase in Tobacco Excise (CHT) levies will have an effect on the amount of inflation. Head of the BPS Margo Yuwono said that although it is believed to have an impact, this condition does not immediately raise inflation higher.

"Usually, the increase in cigarette excise tax will gradually affect inflation and indirectly affect prices at the consumer or retail level, so the transmission will be gradual," he said in a virtual press conference, Monday, January 3.

According to Margo, the level of inflation is directly related to people's purchasing power, especially if several things affect core inflation.

"Actually, there are many factors that will affect purchasing power in 2022 and not only the increase in cigarette excise. So, we still refer to core inflation which shows fixed income if there is a price movement," he continued.

As is known, the government through the Ministry of Finance (Kemenkeu) decided to renew the amount of CHT which includes three important things.

First, the adjustment of excise tariffs and the minimum retail selling price (HJE) for all types of cigarettes is a weighted average of 12 percent with a maximum increase in tariffs of 4.5 percent for SKT.

Second, the simplification of the tariff structure into 8 layers (simplification of Groups IIA and IIB types of SKM and SPM). And the third is the optimization of the CHT DBH policy as a cushion for the CHT policy.

Meanwhile, the adjustment of excise tariffs and the minimum limit for HJE types of Electric Cigarettes (RE) and Other Tobacco Processing Products (HPTL) is 17.5 percent, with specific excise rates.

Meanwhile, the inflation rate in December 2021 was 0.57 percent with the inflation rate for the calendar year (January–December) 2021 at 1.87 percent.