Indonesia Plans New Cigarette Excise Tariff Layer for 2026

Background and Policy Development

Finance Minister Purbaya Yudhi Sadewa has decided to maintain the current cigarette excise tariff (CHT) and retail selling price for 2026 while planning to introduce a new layer in the existing tariff structure. This decision comes as the Indonesian government continues to navigate between fiscal policy and industry sustainability. The new layer is expected to add complexity to the current four-tier system, potentially impacting both legal cigarette manufacturers and consumers.

Industry Response and Concerns

The Indonesian Cigarette Manufacturers Association (GAPPRI) has expressed concerns about the proposed changes and has formally requested to be involved in the policy formulation process. GAPPRI Chairman Henry Najoan emphasized that industry participation is crucial for creating effective solutions that consider both government revenue needs and industry viability. The association highlighted two major challenges currently facing the legal tobacco industry: still recovering consumer purchasing power and the growing circulation of illegal cigarettes.

Economic and Regulatory Implications

The introduction of a new tariff layer could have significant implications for both the legal tobacco industry and government revenue. On one hand, it could help in further differentiating product categories and potentially controlling the tobacco market more effectively. On the other hand, it may add complexity to compliance and potentially increase production costs for manufacturers. The government's decision to maintain the current excise tariff while introducing a new layer suggests a balanced approach between revenue generation and industry sustainability.

Way Forward

The success of this new policy will depend on how effectively the government can balance fiscal objectives with industry needs. The involvement of industry stakeholders, as requested by GAPPRI, will be crucial in shaping a policy that is both effective in controlling the tobacco market and supportive of legal industry operations. The government will need to carefully consider industry feedback and market dynamics before finalizing the new tariff structure.