Cigarette Excise Tax Raised by 15% by January 2012

The government will raise the excise tax for cigarettes by an average of 15 percent next year, higher than initial plan of 12.2 percent on average.

Minister of finance Agus Martowardojo said a decree has been signed for the increase after consultation with the House of Representatives (DPR). The policy will be effective January 1st, 2012.

Agus argued that higher excise tax is needed to reduce cigarette consumption. "The excise tax will increase 15 to 16 percent as of January 1st, 2012. We want to protect the society and promote public health," Agus said as quoted by Detik.com.

The Jakarta Globe reported earlier that in the 2012 state budget draft, the government set total excise revenue at Rp72.4 trillion ($8.4 billion), a 6.3 percent increase from this year’s revised budget of Rp 68.1 trillion ($7.9 billion). Cigarettes will contribute Rp 69 trillion ($8 billion), the lion’s share of the excise tax in next year’s draft budget.

PT HM Sampoerna (HMSP) Tbk, controlled by Philip Morris International, reported cigarette sales of Rp38.3 trillion in nine months of 2011, an increase of 22% from the same period last year, twice the growth of Gudang Garam (GGRM). HM Sampoerna booked operating profit of Rp7.9 trillion in the period, surged 25.8% from the same period in 2010, while net profit jumps 29% to Rp5.9 trillion.

In nine months of 2011, HM Sampoerna paid taxes and excise tax of Rp19.7 trillion, increased 18% from the corresponding period of 2010.

PT Gudang Garam (GGRM) Tbk, meanwhile, reported sales revenue of Rp30.57 trillion, increased 11% from the corresponding period last year, while gross profit grew 18% to Rp7.55 trillion. Operating profit also increased 23% to Rp5.23 trillion in the period.

Gudang Garam posted net profit of Rp3.8 trillion in Jan-Sep 2011, increased 25% from the corresponding period last year on a stable sales and profit margin growth.