Deputy Minister Of Industry: Increased IHT Excise Tariffs Make Illegal Cigarettes Circulate

JAKARTA - The Ministry of Industry (Kemenperin) highlighted the excise tariff on the tobacco products industry (IHT) which continued to rise during the 2020-2024 period. The increase in excise rates is in line with the increase in cigarette retail selling prices by 9 percent this year.

As a result, currently many illegal cigarettes are circulating in the community.

"As we know, the period of 2020-2024 excise rates continues to rise, 23 percent, 12.5 percent, 12 percent, 10 percent and 10 percent, continues to rise. Today, if I'm not mistaken, 57 percent, not to mention VAT, not to mention regional taxes," said Deputy Minister of Industry (Wamenperin) Faisol Riza in a media discussion entitled "Qua Vadis for the Protection of Tobacco Products Industry" in Jakarta, Monday, September 29.

"So, approximately all excise plus taxes total 80 percent. So what the cigarette company enjoys is about 20 percent," he continued.

Faisol said that the increase in excise rates should be applied as an effort to control cigarette consumption for children or people who have health vulnerabilities.

However, he said, the continued increase in excise rates would have a negative impact on the development of the IHT.

"As a result, illegal cigarettes are now increasingly circulating in the community and are detrimental to industries that comply with paying excise," explained Faisol.

He added that non-fiscal policies such as Government Regulation (PP) Number 28 of 2024 concerning the implementation of the Health Law are also in the spotlight. The reason is, a number of provisions will take full effect from July 2026.

With the limited space for industrial movement, Faisol reminded that the sustainability of the IHT is directly related to about six million workers.

Therefore, he hopes that the IHT policy will be more comprehensive in the future which can accommodate aspects of health as well as the economy.

"Moreover, the high circulation of illegal cigarettes must be an important variable in policy formulation," he concluded.