JAKARTADAILY.ID - The Minister of Finance of the Republic of Indonesia Sri Mulyani Indrawati said that cigarettes are causing people to become poorer. Cigarette consumption is the second highest expenditure for the poor in urban and rural areas, beating out spending on protein, from purchasing meat, eggs, tempeh, to fish.
On this basis, the government seeks to reduce the poor's consumption of cigarettes, by increasing the excise taxes on tobacco products (CHT) starting January 1, 2022, with an average increase of 12 percent. With this fiscal adjustment, it is hoped that the price of cigarettes will become increasingly unaffordable for the poor, and encourage them to reduce cigarette consumption, then shift their spending to other basic purchases.
The CHT policy is one of the instruments to improve the quality of Human Resources (HR) which is a crucial agenda in efforts to increase national productivity. This was conveyed by Sri Mulyani Indrawati online in the 2022 Tobacco Products Excise Policy Press Statement, Monday (13 December 2021).
“Today, the President has agreed and after a coordination meeting under the Coordinating Minister for the Economy (Airlangga Hartarto) has conducted the tax increase on average cigarettes is 12 percent. However, for Hand-Rolled Kretek Cigarettes (SKT), the President asked for a 5 percent increase, so we set a maximum 4.5 percent," he said.
According to the Minister of Finance, controlling cigarette consumption has been mandated by the Excise Law. The increase in CHT rates also takes into account the impact on tobacco farmers, workers, and the cigarette industry as a whole, in addition to health issues.
Sri Mulyani Indrawati said that cigarettes are the second-highest expenditure of the poor in urban and rural areas after rice consumption. In terms of total expenditure, cigarette consumption reached 11.9 percent in urban areas and 11.24 percent in rural areas. This figure is lower than the consumption of rice and even higher than the expenditure on protein, such as meat, eggs, tempeh, and fish.
"So cigarettes make people poor. The price of a pack is indeed made increasingly unaffordable for the poor," he said.
From a health perspective, cigarettes can exacerbate the health effects of Covid-19, being 14 times more at risk of contracting COVID-19 compared to nonsmokers. "This is a burden because some of the Covid-19 patients are borne by the state," said the Minister of Finance.
The CHT policy also aims to control the level of cigarette consumption in the community, especially among children and adolescents. In the 2020-2024 National Medium-Term Development Plan (RPJMN) document, the Government targets the smoking prevalence of Indonesian children aged 10-18 years to fall at least to 8.7 percent in 2024, down from 9.1 percent in 2018.
The increase in CHT rates also supports the national development program through state revenues. This was promulgated in the 2022 State Budget Law amounting to Rp. 193 trillion. In addition, the CHT policy is also important as a mitigation of the impact of policies that have the potential to encourage illegal cigarettes. (*)