Government Studies Adding One Layer of Cigarette Tax Rate

JAKARTA - The government is studying the addition of one layer of tobacco excise tax (CHT) in 2026 as an effort to curb the circulation of illegal cigarettes and encourage manufacturers to enter the legal system.

Minister of Finance Purbaya Yudhi Sadewa said that the addition of the tariff layer was intended to provide room for illegal cigarette business actors to switch to official producers.

However, he added, this policy is still in the discussion stage and has not been decided in a final manner.

"We will ensure a new layer, maybe, it is still being discussed. This is to give space for illegal ones to become legal," he explained to the media, after the 2026 early year spirit event, Wednesday, January 14.

According to Purbaya, through the adjustment of the CHT tariff structure, the government wants to ensure that all cigarette manufacturers, both small and large, fulfill their tax and duty obligations to the state.

He added that with the new tariff layer, illegal cigarette perpetrators are expected to no longer have a reason to operate outside the provisions.

Purbaya emphasized that if after the policy was issued, illegal cigarette practices were still found, the government would take firm action in accordance with applicable laws.

"So, they will pay taxes too later if I give them a signal after the layer comes out. The regulation comes out, maybe next week. If they still play around, I will hit everything. There is no more forgiveness," he said.

For information, the CHT tariff structure has previously been gradually simplified, from 19 layers in 2009 to eight layers in 2022.

However, the number increased again to nine layers after the cigarette excise tax rate (KLM) was broken into two layers from the previous one.