Plain Cigarette Packaging May Threaten Economic Growth

Jakarta, VIVA – The policy of plain cigarette packaging without branding, as outlined in the Draft Regulation of the Minister of Health, a derivative of Government Regulation (PP) Number 28 of 2024 on Health, is considered to potentially reduce state revenues and even threaten national economic growth.

Ari Kusuma, Subdirectorate of Excise Tariffs and Basic Prices at the Directorate General of Customs and Excise (DJBC) of the Ministry of Finance, stated that of the four pillars in the formulation of tobacco product policies, the tobacco ecosystem in Indonesia must be considered as a whole.

According to him, the role of the tobacco sector, or tobacco excise (CHT), contributes around 12.2 percent of the total state tax revenue.

Kusuma noted that this is a significant figure when viewed from a single sector's contribution.

"Thus, this sector must be taken into account when making policies, and many parties need to be involved. We cannot look at it from only one perspective," Kusuma said in a statement on Tuesday (Sept 24).

Kusuma explained that the spread of illegal cigarettes during the 2022-2023 period increased from 5.5 percent to 6.9 percent.

This means there are other challenges the government must face if the plain cigarette packaging policy without branding is implemented.

These challenges range from combating illegal cigarettes to various issues related to revenue and production declines.

"We see challenges from the revenue side, and it will affect the decline in production, which in turn will impact excise revenue. The challenges are quite substantial. This will become a task for us to optimize CHT revenue," Kusuma said.

Similarly, Senior Economist from the Institute for Development of Economics and Finance (INDEF), Tauhid Ahmad, stated that aside from the lack of transparency and participation from relevant stakeholders, PP 28/2024 and RPMK could have double, even triple, negative effects, especially considering that excise revenue targets have not been met for the past three years.

"Overall, this is a critical note as we approach October, and next year we will have a new government, which will desperately need budget support," Ahmad said.

"This will raise questions because I think this could become a significant issue. If the Ministerial Regulation is enforced, the feared impacts will not only affect revenues but also workers, the industry, and more," he added.