Increasing tobacco tax: Another smart move by Jokowi?

Photo: Luciano Belviso/CC BY 2.0
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Cheap cigarette prices in Indonesia are driving a health crisis of increasing numbers of smokers and spiralling associated death rates. But with huge numbers of people employed in the tobacco industry, raising prices to reduce this risk is a dangerous move by Jokowi’s government.

By Fawnia

Since rumours about rises in cigarette prices made it to the news a week ago, there has been endless debate, discussions, and surveys. The differences of opinion, which revolve around the effectiveness of the policy and the reasons behind it, show substantial divisions in public opinion.

The price hike is heavily influenced by a recent study from the Centre for Health Economics and Policy Studies at the University of Indonesia. It says that according to a survey of 1,000 people across 22 Indonesian provinces, 82% of the respondents said they approved the idea of a rise. Meanwhile, 72% of smokers agreed they would quit smoking if the price of cigarettes went above Rp 50,000 ($3.80)

At the same time, the results showed that 67% of adult males in Indonesia, or around 70 million people, were smokers and that this number has been increasing sharply since 1995. Compare this to public health figures that explain 217,400 deaths every year are caused by non-communicable diseases and the problem becomes apparent. Of these deaths; smoking cigarettes is the highest risk factor. If you accept that the increase in the number of smokers goes hand in hand with increases in cigarette production, it is also worrying to know that Indonesia will produce 125.3 billion more pre-rolled cigarettes over the next ten years.

Twice the price, twice the risk?

Current cigarette prices in Indonesia range from just Rp 12,000 ($0.9) to Rp 20,000 ($1.5), and this low price makes it easy for teenagers as young as 12 years old to smoke. A survey completed by the World Health Organization in 2014 supported this suggestion, showing around a third of boys between the ages of 13-15 in Indonesia were regularly smoking. That figure will almost certainly have risen.

Despite this pressing evidence the proposal to raise cigarette prices to Rp 50,000 has triggered a range of responses. One member of the House of Representatives believes that although the rise would discourage smoking, the government should be concerned about the fate of people working for tobacco companies. On a similar note, East Java Governor Soekarwo has said the increase would be a significant challenge to employment in the province.

Soekarwo explained his region depends heavily on tobacco industry employment for 6.1 million people, while taxes from smoking products make up the majority of East Java’s locally generated recurring revenue. Indeed, as the tobacco industry is one of the largest sectors in Indonesia, the decision to double the price cannot be made hastily.

At the same time, steps would also need to be taken to rule out an increase in the circulation of illegal products as a result of a price hike. Rumours of the new pricing are already a big concern for Indonesian tobacco farmers, and according to industry insiders, wholesalers are taking advantage by bidding for their stocks at a low price.

This situation has spurred peaceful demonstrations in Central Java by members of the Association of Indonesian Tobacco Farmers (APTI). They are worried for their livelihood and demand the government reduces tobacco imports and cancels the change in pricing. According to another industry group, the jobs of more than 1.5 million workers are at stake.

The significant increase has yet to be finalised, and Finance Minister Sri Mulyani Indrawati says there is no decision yet regarding the new ruling on prices or taxes. Will the government succumb to the public’s angry protest, or will it be a ground-breaking measure that reduces the number of smokers in Indonesia? In the balance of the health of the economy versus the health of the people; there is an enormous amount at stake.