More Than Two-Thirds of Men Are Smokers... This 'Smoking Nation' Raises Tobacco Prices Again

Indonesia Raises Taxes on Clove, White, and Electronic Cigarettes by 11-15%
Average Price Around 2,000 Won per Pack, Cheong Youth Smoking Rate Also at 10%

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Sumi] Indonesia, known as a major smoking nation, has decided to raise the tobacco excise tax by an average of 10% next year. The move aims to reduce smoking rates and increase awareness of the health risks associated with smoking. However, some critics argue that this measure is primarily intended to increase tax revenue.

According to Xinhua News Agency on the 4th (local time), Sri Mulyani Indrawati, Indonesia's Minister of Finance, announced this at a tobacco consumption policy meeting held the previous day.

Specifically, the tax on clove cigarettes, which contain the clove flavoring, will increase by 11.5 to 11.75%. These cigarettes, which have a sweet clove flavor applied to the filter, are known to be very popular, with 96% of Indonesian smokers using them. In addition, taxes on white cigarettes (11-12%), which refer to regular cigarettes, and electronic cigarettes (15%) will also be raised, along with an average increase of about 5% on traditionally hand-rolled kretek cigarettes.

According to the World Health Organization (WHO), Indonesia, where more than two-thirds of the male population aged 15 and older are estimated to be smokers, is considered one of the countries with the highest smoking rates in the world. In particular, the smoking rate among adolescents aged 10 to 18 was as high as 10% as of 2018.

In response, the Indonesian government has been implementing various policies to reduce the high smoking rate, mainly by restricting TV tobacco advertising time and removing online tobacco advertisements. Previously, in June 2019, authorities made this decision based on research showing that a significant number of teenage smokers started smoking after seeing online tobacco ads.

Since 2014, the tobacco excise tax has been raised almost every year, as low tobacco prices were seen to increase accessibility. The price of over 2,000 types of cigarettes produced by about 600 companies in Indonesia is known to be relatively cheap, averaging around 2,000 won per pack compared to other countries. Accordingly, the government raised the average tobacco excise tax by 23% in 2020 and 12% last year.

However, despite these efforts, the smoking rate does not appear to have dropped significantly. Among anti-smoking activists, there is criticism that the government is raising tobacco excise taxes slowly to secure fiscal revenue rather than to reduce smoking rates. Since tobacco has low price elasticity, consumption can only be reduced by significantly increasing prices at once, and raising taxes by about 10% annually mainly helps increase tobacco-related tax revenue rather than decrease smoking rates.

There are also concerns about the regressive tax effect, where the tax burden on low-income groups, who spend a large portion of their expenses on tobacco, increases. In fact, tobacco accounts for 12.21% of household expenditures among urban poor in Indonesia, the second highest after rice. In rural areas, it is reported to be as high as 11.63%.

Regarding this, the Indonesian government explained, "Sudden tax increases lead to side effects such as increased illegal tobacco distribution," and added, "We have considered various aspects including tobacco farmers and the industry."

This tobacco excise tax increase is expected to continue. Minister Sri Mulyani stated, "In 2024, tobacco excise tax will be raised by 10% and electronic cigarettes by 15%," and added, "We will continue to raise tobacco excise taxes to suppress tobacco consumption and production."

This content was produced with the assistance of AI translation services.