"The concept is currently being prepared," said Deputy Minister of Industry Faisol Riza in Jakarta on Monday.
Data from the Ministry of Industry shows that illegal cigarettes accounted for 3.03 percent of the total cigarette volume in 2019. The figure climbed to 6.9 percent in 2023.
Most of these untaxed cigarettes are machine-rolled clove cigarettes (Sigaret Kretek Mesin/SKM), Riza noted.
He warned that illegal circulation is disrupting the domestic tobacco industry, causing a drop in legal cigarette production.
"Several producers have reported impacts such as idle rolling machines, reduced utilization, and layoffs, which ultimately affect workers' welfare," he said.
Riza added that Indonesian smokers are highly price-sensitive and often turn to cheaper products, fueling demand for illegal cigarettes.
"A conducive business climate can only be realized if all parties, including the public, work together to eradicate the circulation of illegal cigarettes," he urged.
Last Friday, Finance Minister Purbaya Yudhi Sadewa announced that the government would not raise the excise tax on tobacco products in 2026.
The plan will be accompanied by an expansion of Tobacco Products Industry Zones (KIHT) to more regions, following an evaluation of existing ones.
According to Sadewa, the government also aims to attract illegal cigarette producers to join these special zones, enabling them to operate legally as part of the tax-paying system.
The circulation of illegal cigarettes in Indonesia has been increasing and shows a rising trend compared to the previous year, posing potential state revenue losses of up to tens of trillions of rupiah.
The main issue lies in the growing sales volume of cigarettes without excise stamps, followed by the use of counterfeit stamps, misuse of excise stamps, and the circulation of reused stamps.
The circulation of illegal cigarettes disrupts the legal tobacco industry, leading to a decline in production and reduced machine utilization, which in turn affects workers’ welfare.
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Translator: Arnidhya Nur Zhafira, Anton Santoso
Editor: Primayanti
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