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Govt may not raise tobacco excise

Jakarta: The government may leave unchanged excise duty for Cigarettes and tobacco next year to protect the cigarette industry's employment rate amid sluggish growth in other labor-intensive sectors. "We expect to count on More excise revenue from an increase in cigarette sales. We forecast the sales will be higher next year," the Finance Ministry's Director General of Customs and Excise Anwar Surpijadi told The Jakarta Post on Tuesday. In the draft of the 2009 state budget, revenue from excise duty is set at Rp 47.5 trillion (US$5.17 billion), up 4 percent from the Rp 45.7 trillion targeted in this year's budget. Anwar said he was concerned a further rise in the excise would hurt the cigarette industry and risk the jobs of its millions of workers. Indonesia, Southeast Asia's largest economy, has the loWest average price of Cigarettes in the world, and analysts believe the livelihoods of 12 million people are directly or indirectly dependent on the country's tobacco and cigarette sector. A pack of red Marlboro is sold for Rp 9,000 (98 US cents), while a pack of Gudang Garam Filter 16 clove Cigarettes is priced at Rp 9,500. In China, a similar kind of cigarette brand is sold at the equivalent of at least Rp 12,000. This year, the government adjusted excise on Cigarettes by reducing the so-called "ad valorem tax" system, under which the excise is determined by a brand's base retail price. The government also increased the duty tax based on the price of a single cigarette. Based on the 2009 budget plan, the government will continue its policy of gradually replacing the "ad valorem tax" with the per-cigarette tax in order to reduce the illegal application of duty on tobacco. "With a specific tax, we're going to have a simpler tax scheme, boosting the industry's compliance," Anwar said. He also disagreed with analysts who believe a 60 percent rise in excise duty would boost state revenue, cut the number of smokers and retain a robust cigarette industry. "Cigarettes which are harmful to human health are perhaps those that are illegal or those that have high (levels of) nicotine. Branded Cigarettes have less nicotine," he said. Chairman of the Indonesian Non-Clove Cigarette Producers Association Muhaimin Moefti said the government and cigarette producers had a consensus to not raise the excise at least until 2010. "This is already stated in the tobacco industry road map for 2007 until 2020," Muhaimin said. He said cigarette producers would tolerate an increase in excise as the rate was below the inflation rate, allowing buyers to cope with rises in cigarette prices. Cigarette producers include excise duty in the selling price of Cigarettes.