Often Sneered, This Is Sri Mulyani's Defense About The Increase In Cigarette Excise Duty In Defense Of The Workers

Customs officers inspect production activities at a cigarette factory. (Photo: Ministry of Finance)

JAKARTA - The government, through the Ministry of Finance, confirmed that the tobacco product excise tax adjustment policy on February 1 had excluded increases in sectors that were directly in contact with large-scale workforce areas.

Minister of Finance (Menkeu) Sri Mulyani said for the type of hand-rolled kretek (SKT), the excise rate would not increase. This consideration was taken because SKT is a labor-intensive sector and encourages the economic recovery of people during a pandemic.

He noted that there are more than 158 thousand workers who work directly in cigarette factories and 526 thousand families involved in tobacco farming.

"From the design side of the portion we side with the workers so that they are not affected (increase). Meanwhile, machines (machine-made kretek cigarettes / SKM) that are efficient and have extraordinarily large production are raised quite high, ”he said in a working meeting with Commission XI of the DPR-RI last week.

To note, the highest increase in excise was for white cigarette or machine white cigarette (SPM) products with the highest amount of 18.4 percent and the lowest at 16.5 percent.

Meanwhile, SKM products had the highest increase of 16.9 percent and the lowest was 13.8 percent. Meanwhile, all of the processed tobacco products that are included in the SKT category do not experience an adjustment in the excise tariff, aka 0 percent.

"For SKM and SPM products, the tariff gap will be narrowed as a signal of future simplification," he said.

From this increase, the government then estimates that production growth is expected to fall by 3.2 percent to 288.8 billion cigarettes in 2021. Meanwhile, production in 2020 is known to be 298.4 billion cigarettes.

Then, the affordability index is believed to have increased from 12.2 percent to 13.7 percent to 14 percent, which indicates that cigarette prices are increasingly unaffordable. Furthermore, the prevalence of smokers is expected to fall to 32.4 percent, and children and adolescents to 8.9 percent.

"This reduction is consistent with the 2020-2024 National Medium Term Development Plan (RPJMN) target which targets 8.7 percent," he said.

From the revenue side, the 2021 State Budget targets this year's excise to contribute IDR 173.78 trillion. This figure is lower than the realization in 2020 which amounted to IDR176.3 trillion.