Indonesia Considers Tobacco Tax Increase, prioritizes Worker Safety Net
Jakarta, Indonesia – Indonesia’s Finance Minister Purbaya Yudhi Sadewa indicated Friday that any potential increase in tobacco excise taxes will be carefully considered alongside measures to protect the livelihoods of workers in the industry. The government is wary of policies that could lead to widespread job losses without adequate support for displaced employees.
“You can’t kill the industry unless there’s a programme to absorb the displaced workforce,” Purbaya stated, expressing concern that significantly higher cigarette excise rates could trigger mass layoffs. he emphasized the need for worker transition plans to accompany any tax increases aimed at curbing consumption and boosting state revenue. “Have we prepared a program to address unemployment? No, we haven’t,” he added.
The Minister stressed the importance of public awareness regarding the health risks of smoking, but cautioned against industry shutdowns without government intervention. He plans to assess the condition of the cigarette industry,particularly in East Java,and investigate the growing illegal tobacco market,which he says negatively impacts legitimate businesses.
The discussion around excise rates comes as the government reviews the 2026 rate, with deputy finance Minister Anggito Abimanyu confirming on thursday (September 18) that “There’s still time. No decision has been made.”
During a recent budget meeting with the house of Representatives, the government and lawmakers agreed to raise the 2025 customs and excise revenue target to Rp336 trillion (USD19.7 billion), an increase from the previous target of Rp334.3 trillion. The specific details of the new tariff will be persistent following an evaluation of this year’s performance.
Beyond tax policy, Purbaya revealed the ministry is actively investigating illicit practices within the tobacco industry, including the circulation of counterfeit excise stamps. He believes addressing this issue is crucial, stating, “If I can fix the counterfeit issue, we’ll generate real revenue. That will help shape my next policy steps.”
Indonesia’s tobacco industry is a significant employer and contributor to state revenue, but faces increasing pressure to align with public health goals. The government’s approach will likely balance these competing priorities, seeking to maximize revenue while mitigating potential social and economic disruption.
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Translator: Resinta Sulistiyandari
Editor: Rahmad Nasution
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