Indonesia Officially Issues New Tax on E-Cigarettes

Jakarta – The Indonesian Finance Ministry officially issued a Cigarette Tax on Electronic Cigarettes (REL) on January 1, 2024. This is stated in the Minister of Finance Regulation (PMK) Number 143/PMK/2023. 

The regulation regulates the procedures for collecting, withholding, and depositing cigarette tax. The cigarette tax referred to in this PMK includes the e-cigarette tax. 

Luky Alfirman, Director General of Fiscal Balance, revealed that the issuance of this PMK is intended as an effort to control cigarette consumption by the community.  

"The implementation of Cigarette Tax on Electronic Cigarettes (REL) on January 1, 2024, is a form of the Central Government's commitment to providing a transition period for cigarette tax collection on e-cigarettes since the imposition of excise tax in mid-2018," Alfirman said in Jakarta on Saturday. 

Alfirman stated that the imposition of cigarette excise on e-cigarettes will also have consequences on the imposition of cigarette tax which is a levy on cigarette excise (piggyback taxes).  

However, at the time of the imposition of the e-cigarette excise tax in 2018, cigarette tax will not be imposed immediately. 

This is an effort to provide a sufficient transition period for the implementation of the piggyback tax concept that has been implemented since 2014, which is the mandate of Law Number 28 Year 2009.  

Furthermore, the imposition of excise tax on e-cigarettes is not only for state revenue but also aspects of justice considering that conventional cigarettes in their operations involve tobacco farmers and factory workers who have been subject to cigarette excise tax since 2014.  

According to him, in the long run, the use of e-cigarettes is indicated to affect health and the ingredients contained in e-cigarettes include consumer goods that need to be controlled.  

Excise revenue from e-cigarettes in 2023 will only amount to IDR 1.75 trillion or only one percent of the total Tobacco Excise Revenue (CHT) in a year.  

Alfirman added that the policy of imposing e-cigarette excise is a joint contribution between the government and stakeholders, especially e-cigarette business actors, which is expected to provide optimal benefits for the community.  

"At least 50 percent of cigarette excise revenue is earmarked for public health services (Jamkesnas) and law enforcement which ultimately supports better public services in the regions," he concluded.