Indonesia hopes price hikes will cut smoking

Plans by the Indonesian government to raise tobacco excise tax and minimum cigarette prices in 2020 will force companies to cut production and potentially cause layoffs, industry associations said on Wednesday.

Indonesia has one of the world’s highest smoking rates and tobacco is responsible for 14.7% of all deaths in the country, mostly through cardiovascular diseases, according to the World Health Organisation.

The government wants to reduce consumption by raising minimum cigarette prices across all categories by an average 35% and cigarette taxes 23%.

Three associations of cigarette makers warned in a joint statement that the steep increase will force them to cut 15% of production volumes, resulting in disruption in the cigarette sector, a 30% drop in absorption of tobacco and clove, job cuts and an increase in sales of illegal cigarettes.

CIGARETTE PRICES WILL RISE 35% AND TAXES BY ALMOST A QUARTER IN A COUNTRY THAT HAS ONE OF THE HIGHEST SMOKING RATES

“The tobacco industry is a strategic industry that gives a big contribution of 10% of the state budget, or as much as 200-trillion rupiah ($14.2bn),” they said, adding that they are “disappointed” they were not consulted.

The industry produced 330billion cigarettes in 2018, according to government data, while the associations say the industry employs 7.1-million people in manufacturing and sales of tobacco products and tobacco plantations.

Finance minister Sri Mulyani Indrawati defended the planned hike on Monday, saying the government has tried to find “a balance” between rising numbers of young smokers and cigarettes’ popularity among Indonesia’s poorest, with the possible effect on the livelihoods of tobacco farmers.