The government has decided to raise the excise duty for cigarettes and tobacco products by an average 7 per cent beginning 1 February 2009.

The excise duty will be modified from its current combination of ad valorem and specific taxes to a specific tax only, based on production levels and retail prices for cigarettes and tobacco products, the finance ministry said in a statement Wednesday. The ministry's head of fiscal policy, Anggito Abimanyu, said the new duty scheme would simplify the tax calculation. The ministry will also simplify the categorisation of factories producing machine-made clove and white cigarettes from three types to two, while maintaining the segmentation of factories making hand-made clove cigarettes in three categories.
The Jakarta Post reported the excise duty increase is aimed at containing the growth of cigarette consumption to 5 per cent, which is less than the 7 per cent growth booked in 2008, and to increase excise duty income from the industry to IDR 48.2 trillion (EUR 3.42 billion) as stated in the 2009 state budget, up IDR 2.7 trillion from the 2008 budget.
Indonesia, Southeast Asia's largest economy, has the lowest average price for cigarettes worldwide. (pi)