The government through the Ministry of Finance has established a tobacco product excise tariff policy in 2021. This policy is in line with the vision and mission of the President of the Republic of Indonesia, namely "Advanced Human Resources, Excellent Indonesia", through a commitment to control consumption for the sake of health, but also to protect workers and farmers. and industry by minimizing the negative impact of policies, as well as seeing opportunities and encouraging exports of Indonesian tobacco products. There are several main points of excise tax on tobacco products for the period of 2021, namely (1) Only the amount of excise tax on tobacco products will change, considering that 2021 was a tough year for almost all industries including the tobacco products industry. (2) Simplification is described by reducing the tariff gap between machine-made kretek cigarettes (SKM) class II A and SKM class II B, and machine white cigarettes (SPM) class II A and SPM class II B; and, (3) the amount of retail selling price on the market is in accordance with the respective tariff increases.
The government sets the weighted average of the increase in excise tax per type of cigarette at 12.5 percent. The government has also decided not to increase the excise tariff for hand-rolled kretek cigarettes (SKT), based on considerations of the pandemic situation and labor absorption by the Tobacco Products Industry (IHT). In detail, the increase in SKM excise rates is 16.9 percent for class I, 13.8 percent for group II A, and 15.4 percent for group II B. While the types of SPM are 18.4 percent for group I, 16.5 percent for group II A, and 18.1 percent for group II B. This policy was taken by the Government through consideration of five aspects, namely health related to the prevalence of smokers, labor in the tobacco product industry, tobacco farmers, illegal cigarette distribution, and revenue. Departing from these five instruments, the Government seeks to create an inclusive tobacco excise tariff policy. This policy is expected to have a positive impact on each of the aspects of consideration.
Through the health aspect, the increase in tariffs will increase the selling price which will have an impact on controlling cigarette consumption, reducing the prevalence of smoking which is generally expected to decrease from 33.8 percent to 33.2 percent in 2021. In addition, it is also hoped that a decrease in the smoking prevalence of children of age The 10-18 years are targeted to fall to 8.7 percent in 2024 from 9.1 percent in 2020. From the labor aspect, the Government is trying to protect the existence of labor-intensive industries in the formulation of excise tax on tobacco products in 2021. The format of the policy above still considers the type of cigarette ( especially SKT) which greatly contributed to the direct employment of 158,552 people.
From the agricultural aspect, the magnitude of the increase in excise rates takes into account the local tobacco absorption rate. Therefore, the increase in excise tax on kretek cigarettes is lower than the increase in the excise tax on white cigarettes, even this year's SKT has not increased. It is hoped that the absorption rate of local tobacco can be maintained considering that there are more than 526 thousand households who depend on tobacco farming. From the industrial aspect, there are policies for Micro, Small and Medium Enterprises (MSMEs) by allocating Tobacco Excise Production Sharing Funds (DBH CHT) to form Tobacco Products Industrial Zones (KIHT) as a preventive measure against the circulation of illegal cigarettes. From the aspect of circulation of illegal cigarettes, so that policies do not become incentives for the circulation of illegal cigarettes. Supervision and enforcement efforts will continue to be improved, both preventive through socialization and establishment of the Tobacco Products Industrial Zone (KIHT), and repressive through Illegal Cigarette Combat Operations, Net Operations, maritime patrols, and various synergistic actions with law enforcement officials and parties other related. From the revenue aspect, although the tobacco product excise tariff policy focuses on controlling consumption, nevertheless, the excise policy adopted is able to support the national development program through state revenue. The excise revenue target in the 2021 State Budget is IDR 173.78 trillion. To ensure the achievement of the tobacco product excise policy objectives above and reduce the impact of unwanted policies, the government has made a policy cushion in the form of rearranging the use of tobacco product excise revenue sharing (DBHCHT). As much as 50 percent will be used to improve the welfare of the community, especially tobacco farmers / laborers and cigarette workers.
Of this allocation, 35 percent will be provided through the support of a social environment fostering program consisting of Direct Cash Assistance (BLT) for tobacco farm workers and cigarette workers, 5 percent for professional training for farm workers / cigarette factory workers including business capital assistance to farm workers / cigarette factory workers who will turn to become UMKM entrepreneurs, and 10 percent for support through a program to improve the quality of raw materials. The other allocation of 25 percent is to support the national health insurance program, and 25 percent to support law enforcement in the form of an industrial development program, a socialization program for provisions in the excise sector, and a program to eradicate illegal excisable goods. In order to prevent policies from becoming incentives for the circulation of illegal cigarettes, efforts to control and enforce them will continue to be intensified, both preventive and repressive. As of 30 November 2020, the Directorate General of Customs and Excise (DJBC) as a unit under the Ministry of Finance, has carried out prosecution 8,155 times with an average of 25 catches per day. The prosecution succeeded in securing 384.51 million sticks of illegal cigarettes, or the value of Rp. 339.18 billion. Even in a pandemic situation, surveillance and enforcement activities compared to the previous year increased by 41.23 percent year on year (yoy). Based on the results of a survey of illegal cigarettes by the Economics and Business Research and Training Unit of Gadjah Mada University (P2EB UGM), the rate of illegal cigarette circulation in 2020 is 4.86 percent. Taking into account the complexity, industrial structure, scope of supervision, and limitations of movement due to the implementation of Large-Scale Social Restrictions (PSBB), these results are very good results, especially when compared to the level of illegal cigarettes circulation in other countries, particularly in ASEAN. . Furthermore, the Government will continue to encourage exports of Indonesian tobacco products because of their high competitiveness. Data for the last four years shows that SPM exports have an increasing trend. SPM exports in 2019 reached 81.4 billion sticks, which jumped from 70.9 billion sticks in 2016. To support the export of tobacco products, the government has provided facilities in the form of postponing payment of excise stamps for local sales for companies that predominantly export from the normal 60 days. to 90 days, Bonded Zone (KB) facilities, and Ease of Import for Export Purposes (KITE).
This policy will take effect on February 1, 2021. Currently, the regulations related to the 2021 Tobacco Excise Policy are in the process of being legislated and will soon be promulgated. The government will ensure that the transition process from the CHT 2020 policy to 2021 will run without a hitch. On the first occasion after it is promulgated, DJBC and related parties will socialize the related rules. At the same time, DJBC also formed a task force to oversee the transition process. The government is committed to promoting labor-intensive industries that use high local content, including local tobacco and cloves. The government is also ready to encourage and facilitate the tobacco products industry which has the potential to encourage export activities, in accordance with the agenda of the National Economic Recovery (PEN) program. Through the policy mix issued in conjunction with the tobacco product excise tariff policy, the Government hopes that the tobacco products industry will recover in 2021.
