High Cigarette Tax and Purbaya's Step

Cigarette taxes have always been an issue that triggers debate in Indonesia. The high tariffs have led many parties to question the reasons behind this policy. On the one hand, the government asserts that the cigarette tax functions to control consumption that has a negative impact on health. On the other hand, revenues from this sector have become one of the largest contributors to the state treasury. A question also arises: is this policy truly effective and fair?

The Finance Minister Purbaya Yudhi Sadewa is at the center of a maelstrom of controversial policies. He or she inherited the cigarette tax policy that has long been considered burdensome, not only for consumers but also for the tobacco industry and tobacco farmers. Purbaya then emphasized the need for balance. They said that the cigarette excise tax rate was already too high and opened up discussions about adjustments. However, tariff reductions cannot be carried out arbitrarily because government revenue from this sector cannot be ignored.

Cigarette Tax as a Fiscal Instrument

The government places cigarettes in the category of excisable goods because of the harmful impact they have on public health. High taxes are intended as a fiscal instrument to control consumption, especially among teenagers and low-income groups. With the high price of cigarettes, it is expected that purchasing power will decline, so that consumption can be kept under control.

In addition, revenue from cigarette taxes has become one of the mainstays of the national budget. This revenue is used to cover the deficit, fund development, and support health programs. However, various studies show that the cost of treating smoking-related diseases is much greater than the revenue that goes into the national treasury.

Public Health Impact

Cigarette smoking contributes greatly to the rising incidence of non-communicable diseases in Indonesia, such as lung cancer, heart disease, and even stroke. Data from the Ministry of Health show that medical costs due to smoking reach trillions of rupiahs each year. This is one of the strong reasons why the government is reluctant to significantly reduce the excise tax rate.

On the other hand, international health organizations such as the WHO encourage developing countries to raise cigarette tax rates. This measure is considered an effective strategy for reducing consumption while increasing state revenue. Indonesia is among the countries with the highest smoking prevalence in the world, so such fiscal measures are considered relevant.

State Revenue and Regional Taxes

The cigarette tax is not only applicable at the central level. The local government also receives a share through the additional consumption tax levied on excise. Thus, every cigarette in circulation actually makes a double contribution: filling the national treasury as well as the regional treasury. However, field practices are often different. An increase in excise tax rates actually encourages the circulation of illegal cigarettes that do not pay taxes.

This phenomenon of illegal cigarettes has now become Purbaya's main focus. He stressed that the government cannot continually raise tariffs without anticipating the side effects. Otherwise, the market will be flooded with illegal products that harm the country.

Purbaya's Strategic Steps

Purbaya said the current average cigarette tax rate has reached 57 percent. That figure, in his view, is too high and has the potential to put pressure on the industry. He stressed the need to review the excise policy so as not to harm tobacco farmers, factory workers, and industry players.

However, fiscal policy cannot simply side with the industry. The state must continue to ensure that cigarette consumption does not increase. Therefore, Purbaya emphasizes the need for a balanced approach: safeguarding public health while also considering the sustainability of the economy.

Dialogue with Industry

Before deciding the excise policy for the year 2026, Purbaya ensures that he will sit down with the cigarette association. This dialogue is important so that the government can hear the industry's aspirations directly. This step is also expected to ease tensions that have arisen due to the tariff increase policy, which has long been felt to be too extreme.

In his statement, Purbaya asserted that the government is open to input. However, he reminded that the final decision must still take into account the health of the general public. The industry is expected to understand that excise taxes are not merely fiscal instruments, but also tools for controlling consumption.

Stamp out illegal cigarettes.

The issue of illegal cigarettes has become the main concern. Purbaya emphasized that the government will conduct random raids on sellers and suppliers. The authorities will also inspect warehouses and distribution channels to ensure there is no foul play behind the circulation of illegal cigarettes.

This step is not without a reason. The price surge due to tariff increases is often exploited by certain parties to market untaxed products. The state's losses from this practice reach trillions of rupiah each year. With strict enforcement, Purbaya hopes that state revenue will remain intact.

Internal Audit and Law Enforcement

In addition to field raids, Purbaya also highlighted the potential for internal leaks. They said there will be a thorough inspection of import routes that are prone to smuggling. This internal inspection is important to ensure the integrity of the excise tax system. Without strict supervision, the policy that has already been designed will not work effectively.

Challenges and the Future of Policy

The future of tobacco tax policy will always face a dilemma. On one hand, the government wants to reduce consumption for the sake of public health. On the other hand, government revenue from cigarette taxes cannot be ignored. This clash of interests makes every decision complex.

Maintaining Balance

Purbaya emphasizes the need to maintain balance. Tariff reductions that are too drastic could reduce government revenue. Conversely, aggressive tariff hikes could spur illicit cigarettes and squeeze the industry. Therefore, going forward, the cigarette tax policy is likely to be more moderate, not as extreme as before.

Public Health Demands

Civil society organizations continue to urge the government not to lower tariffs. They deem public health to be a priority. Data show that cigarette consumption in Indonesia is still very high, especially among teenagers. It is feared that a tariff reduction would actually worsen the situation.

Long-term effectiveness

Economists assess the effectiveness of tax policy not only by revenue. Even more important is its impact on society's behavior. If consumption remains high even though tariffs rise, it means the policy needs to be reviewed. Purbaya seems to realize this and opens up space for a thorough evaluation.

The cigarette tax policy in Indonesia is not just about numbers. It concerns public health, state revenue, and the sustainability of the industry. Purbaya is now at a difficult crossroads, where every decision has major consequences. One thing is certain, this issue will continue to be in the public spotlight.