Indonesia: Cigarette Excise Hike Won''t Hurt State Revenue

Source from:  The Jakarta Post  10/10/2013

The Finance Ministry's plan to increase cigarette excise in a bid to curb consumption will not hurt state revenue, an official says.

"Economic research has shown that an increasing excise rate for cigarettes, which leads to a price increase, does not have a linear correlation with a decline in state revenue. Cigarette prices are inelastic, so a decrease in consumption will not lead to a revenue decline," Finance Ministry excise and customs unit head Djaka Kusmartata told The Jakarta Post on the sidelines of a seminar on cigarette excise on Wednesday.

He said that people citing state revenue decreases as an argument in opposing the government's plan to increase cigarette excise might not understand the principle. Concerns have risen about cigarette consumption in Indonesia, which is deemed high due to cheap cigarettes. Last year, the World Tobacco website claimed 30 percent of the country's 248 million population smoked, making it the fifth-largest cigarette market in the world. Enditem