In the 2022 State Budget Law (UU APBN 2022), the Government of Indonesia sets an 11 percent increase in cigarette excise, which is planned to take effect in February 2022. This is projected to increase state tax revenues from cigarettes by 11.9 percent in 2022. The increase in cigarette excise may ALSO have an impact on rising production prices and the selling price of cigarettes is expected by the government to reduce the number of smokers in Indonesia. Then, what will be a good solution for the business ?
What is the Reason of Rising Cigarette Excise ?
Many factors are driving the government to ratify the discourse on increasing cigarette excise in 2022. One of them is to control the number of smokers in Indonesia. Here are the complete reasons behind the increase of cigarette excise:
1.Reducing the Number of Child Smokers in Indonesia
The number of smokers in Indonesia is at an alarming rate. At 33.8% or about 65.7 million Indonesians are smokers, Indonesia is ranked third as the country with the highest number of smokers in the world. This will have a major impact on Indonesia’s productivity in the future. The reason is, from these data there are children who smoke up to 9.1%. Obviously, this will have an impact on the productivity levels of these children as adults due to a decline in quality of life. The increase in cigarette excise will have an impact on the production price and selling price of cigarettes. This will also reduce purchasing power.
2. Fiscal Reform Strategy by the World Bank
Indonesia is inseparable from the COVID-19 pandemic. Economics is one of the areas most affected. On the other hand, the cigarette industry is one of the largest industries in Indonesia. This means that the cigarette market in Indonesia is quite large. The World Bank then saw this as an opportunity for Indonesia to be able to support economic recovery by increasing cigarette excise. It is estimated that in 2022, excise revenues in the Draft State Revenue and Expenditure Budget (RAPBN) will reach Rp 203,920 trillion or grow 11.9% compared to 2021.
The Impact of Rising Cigarette Excise for Business
The increase in cigarette excise tax will have a direct impact on business actors. Examine the previous policy, the number of cigarettes consumed has not decreased, but people have reduced the ‘class’ of cigarettes consumed to rolled cigarettes because they are considered cheaper. However, if business actors switch to rolled cigarette manufacturers, this means that they have to increase the number of workers. On the other hand, business actors must also consider rising excise. So it is not the right decision for business actors to switch to the hand-rolled cigarette industry or hand-rolled kretek (SKT).
Light Cigarettes Slitting, a Good Solution For Your Business
If you have read our article on Cigarette Industry Automation, then you have understood that one solution for the business is to use machine power in every cigarette production process or switch to an automation system. As to minimize production costs by not using a lot of human labor and minimizing losses due to cigarette damage. To minimize losses, Solo Abadi Indonesia innovated to re-use reject cigarettes and turn them into new products into a good quality with Light Cigarettes Slitting.
Light Cigarettes Slitting is our innovation to help cigarette businesses minimize losses due to failed products. Light Cigarettes Slitting will separate ambri from tobacco in damaged products. This is an essential function that must be owned by business actors. This product has the capacity to peel 150 cigarettes of reject cigarettes per minute. This will make your cigarette production efficient.
We are committed to always supporting Usaha Mikro Kecil dan Menengah (UMKM) and domestic products. Consult your needs via our WhatsApp and visit our website at www.soloabadi.com for more info.
