The government has pushed up the value-added tax (PPN) on cigarettes to 9.1 percent this year as part of its gradual effort to increase the rate to 10 percent, a number that already applies to other consumer goods.
The raised tax, which is up from 8.7 percent last year, has been effective since Jan. 1, according to Finance Minister Regulation No. 174/PMK 03/2016.
The Association of Indonesian Light Cigarette Producers (Gaprindo) has protested the new measure as the rise breaches the government’s agreement with industry players.
Earlier, both approved of the rate at 8.9 percent for this year and 9.1 percent for next year, said the group’s chairman Muhaimin Moefti as quoted by Kontan on Friday. The government, in this case, showed its inconsistency in making its policy, he added.
So far the group’s members had no choice but to comply with the rules, although they might have further discussions on this issue, Muhaimin said.
The higher value-added tax follows a 10.54 percent increase on average for cigarette excise tax, also coming into force early this month.
The double taxes may pose another challenge for the local cigarette industry to expand its business following the Supreme Court’s ruling late last year that annulled an Industry Ministry’s tobacco road map.
Under the road map, cigarette production is set to reach 524.2 billion units by 2020. Five anti-tobacco activists challenged it last year on public health concerns. (lnd)