• In Indonesia, Law No. 39 of 2007 (Amendments to Law No. 11 of 1995) allows excise taxes of up to 57 percent of the selling price of cigarettes. Currently, though, cigarette taxes comprise significantly less (approximately 40 percent). This results in Indonesia having, undoubtedly, some of the lowest cigarette prices in the Southeast Asian region.
• In the past decade, rapid economic growth in Indonesia, which has increased faster than the increase in retail prices of cigarettes, has made cigarettes significantly more affordable than a decade ago.
• Global evidence has shown that increases in cigarette excise taxes which result in price increases reduce tobacco use (The Economics of Tobacco and Tobacco Control, 2018).
• The prevalence of smokers in Indonesia is relatively high compared to other countries in the Asian region. Data from the World Health Organization (2016) shows that during the period 2000 to 2015 smoking prevalence declined in countries like China and India, but increased in Indonesia.
• While the Government of Indonesia has taken steps to increase cigarette excise taxes and simplify excise tax tariffs in recent years, a Presidential decree (PMK 156) not to raise the cigarette excise in 2019 has dealt a blow to these efforts. Furthermore, the Minister of Finance Regulation (PMK) 146, which planned to simplify excise tax tiers further, was also stopped in this decree.