In keeping with yearly regulators, Indonesia’s Ministry of Finance (MoF) has announced the revised retail prices (HJE) for cigarettes that will take effect as of January 1, 2025. Despite the fiscal year’s Cigarette Excise Tax (CHT) not witnessing a hike, cigarette prices in the retail market have still experienced an increase. This is outlined in the Ministry of Finance Regulation Number 97 of 2024 regarding the Tariffs for Cigarette Excise Tax (CT).
The stipulated retail prices are as follows:
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Machine-Made Clove Cigarettes (SKM):
- Lowest price in Class I is Rp 2,375 (up by 5.08%) with a Rp 1,231 tax per packet.
- Lowest price in Class II is Rp 1,485 (up by 7.6%) with a Rp 746 tax per packet.
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Machine-Made White Cigarettes (SPM):
- Lowest price in Class I is Rp 2,495 (up by 4.8%) with a Rp 1,336 tax per packet.
- Lowest price in Class II is Rp 1,565 (up by 6.8%) with a Rp 794 tax per packet.
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Hand-Rolled Clove Cigarettes (SKT) or Hand-Rolled White Cigarettes (SPT):
- Prices ranges from Rp 1,555 to Rp 2,170 in Class I with Rp 378 tax per packet.
- Lowest price in Class II is Rp 995 (up by 15%) with Rp 223 tax per packet.
- Lowest price in Class III is Rp 860 (up by 18.6%) with Rp 122 tax per packet.
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Hand-Rolled Filter Clove Cigarettes (SKTF) or Hand-Rolled Filter White Cigarettes (SPTF) :
- Lowest price is Rp 2,375 (up by 5%) with Rp 1,231 tax per packet.
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Incense Sticks (KLM):
- Lowest price in Class I is Rp 950 (total tax unchanged).
- Lowest price in Class II is Rp 200 (total tax unchanged).
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Iris Tobacco (TIS):
- The price ranges from Rp 55 to Rp 180 (unchanged from the previous year).
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Leaf Cigars or Cigarillos (KLB):
- The lowest price is Rp 290 (unchanged from the previous year).
- Cigars (CRT):
- The prices range from Rp 495 to Rp 5,500 (unchanged from the previous year).
Regarding the reasons behind these price revisions, the Ministry of Finance emphasizes the need to regulate cigarette consumption, protect the labor-intensive cigarette industry that relies on hand-rolling processes, and ultimately, optimize state revenue.
Title: Tobacco Price Hike to Begin on January 1, 2025: A New Normal?
Introduction
Starting January 1, 2025, the price of cigarettes and other tobacco products will see a significant increase, according to the latest government regulations. This move, aimed at reducing tobacco consumption, has sparked a mix of reactions from consumers and industry stakeholders. Let’s delve into the details and the potential impact of this price hike.
Price Increase Breakdown
The tobacco price increase is part of a larger strategy to curb smoking in Indonesia, which has one of the world’s highest smoking rates. Here’s a breakdown of the upcoming changes:
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Cigarette Sticks: The price of cigarette sticks will increase by around 18%, with a range of IDR 2,500 to 5,000 ($0.17 to $0.34) per pack, depending on the brand.
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Cretex (Bulk Cigarettes): The price of bulk cigarettes, or ‘cretex,’ will see a similar increase, ranging between IDR 3,000 to 6,000 ($0.20 to $0.40) per pack.
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Cigarette Pouch: A packet of 10 cigarette pouches will increase by around IDR 3,000 ($0.20), bringing the new average price to around IDR 20,000 ($1.35).
- Clove Cigarette: Clove cigarettes, a traditional Indonesian variant, will see a price increase of around 10%, ranging from IDR 14,000 to 30,000 ($1 to $2) per box.
Potential Impacts
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Deterrent for Smoking: The primary goal of this price hike is to discourage smoking, particularly among youth, by making tobacco products less affordable.
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Industry Repercussions: Tobacco companies may face pressures to reduce their production costs or absorb some of the price increase to maintain market share. However, this could potentially lead to job cuts or factory closures in the cigarette industry.
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Tax Revenue Boost: The price increase is also expected to boost tax revenue, as the higher prices will result in more excise tax collected.
- Black Market and Illicit Trade: There are concerns that the price hike could drive consumers to seek out cheaper, possibly illicit, products, further fueling black market activities.
Conclusion
The tobacco price hike starting January 1, 2025, signals a new normal in Indonesia’s effort to cut down smoking rates. While the move may not be popular among smokers, public health experts welcome this measure as a significant step towards curbing tobacco consumption. It remains to be seen how the market and consumers will adapt to this change, but one thing is clear: the price of smoking is set to get higher, literally.