Cigarette excise tax in Indonesia is a kind of tax that is functioned to control the retail prices of cigarettes done the Indonesian government on cigarettes and other tobacco products such as cigarettes, cigars, and leaf cigarettes. This provision applies with the existence of Act Number 11 of 1995 (Undang-Undang Nomor 11 Tahun 1995) concerning Excise, with some revisions referring to Act Number 39 of 2007 (Undang-Undang Nomor 39 Tahun 2007). This rule was then complemented by Act Number 28 of 2009 (Undang-Undang Nomor 28 Tahun 2009) concerning Regional Taxes and Regional Levies. Taxation of tobacco with cigarette excise is well distinguished.
History and legend
In Indonesia oral tradition, the imposition of taxes and excise on cigarettes was first attributed to the legend Rara Mendut. Rara Mendut rejected Tumenggung Wiraguna's proposal after becoming a tribute to the success of Mataram in quelling the Pati Rebellion in 1627. Angered by her rejection, Tumenggung Wiraguna levied 3 Real a day as a levy. This request was fulfilled by Rara Mendut by selling cigarettes. His cigarettes were a sellout because Rara Mendut's beauty was admired by the man in the kingdom, and according to gossip, he taped the rolled cigarette with his own saliva.
Establishment of customs and excise practice
Officially and in written history, customs and excise have been established in Indonesia since the Dutch colonial era, based on Dutch Indies Law Tabsacccijns Ordonnantie, Stbl. 1932 Number 517, which was then followed up as the founding of De Dienst der Invoer en Uitvoerrechten en Accijnzen (I. U & A). This organization continued during the Japanese occupation, but only levied excise, and was restructured during the Indonesian administration. Cigarettes and tobacco remain the target of excise duties today.
Purpose of imposing excise
The danger of cigarette consumption for health has been proven by many studies in the world. Tobacco consumption control has become a holistic approach that requires the contribution of various parties. One of the cigarette control mechanisms that can be enforced by the government is to push the selling price of cigarettes through excise. The imposition of excise to increase the price of cigarettes at an extremely low price has succeeded in reducing cigarette consumption and reducing the prevalence of cigarette related diseases in various countries, such as South Korea, France and the Philippines.
Protection of juveniles and teenagers
Of all the various cigarette consumers, the most critical influence about the low price of cigarettes is juveniles and adolescents. With pennies in hand, they can obtain cigarettes easily, which is only Rp. 1,000 (around $0.07) at most case. Thi has been a reason why cigarette excise needs to be increased, so that it becomes unaffordable for them. At present, Indonesia ranks the top of the country with the largest proportion of early smokers in the Asia Pacific. Based on data released by Global Youth Tobacco Survey in 2014, one of five children aged 13–15 years in Indonesia has smoked. If this condition develops consistently, Indonesia will bear the burden of high healthcare expense when they grow up and start suffering from degenerative diseases earlier due to smoking habits at an early age.
Battling the low priced cigarette
The smoking prevalence in Indonesia is the highest in the world for adult male smokers, teen smokers, and juvenile smokers. One of the main causes is the outrageously low price of cigarettes in Indonesia. The average price of cigarettes in Indonesia is very low compared to prices in Asian countries such as Singapore, Malaysia, Thailand and even India is the main factor why the number is still high. This is exacerbated by the habit of street vendors selling single cigarette, making it easier for poor people or children to buy them at very cheap prices. Therefore, a policy is needed to make the price of cigarettes soar.