The Influence of Tobacco Regulation to Tobacco Industry Sustainability

Candra Fajri Ananda (), Imanina Eka Dalilah () and Tiara Juniar Soewardi ()
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Candra Fajri Ananda: Brawijaya University
Imanina Eka Dalilah: Brawijaya University
Tiara Juniar Soewardi: Brawijaya University

No 9912231, Proceedings of International Academic Conferences from International Institute of Social and Economic Sciences

Abstract: The Minister of Finance Regulation (PMK) No. 146/PMK.010/2017 brings pro and cons in the national economy. The interest of government and industry should be taken into consideration. This paper will explore the impact of PMK implementation to tobacco excise revenue, production volume and industry performance. Minister of Finance Regulation (PMK) No. 146/PMK.010/2017 regarding the simplification of cigarettes tiers. Those policy threatened the sustainability of the Tobacco Industry and national excise revenue. As the strategic industry due to its roles in national revenue, employment creation and its value as industrial heritage in Indonesian history, it needs to be explored. This study aims to analyze the impact of PMK No.146/2017 to the tobacco industry by considering people purchasing power. Simulation model with three different scenarios is used to prevail the effect of the regulation to volume products of tobacco industry. Obtaining more details analyses, Focus Group Discussion (FGD) with the stakeholders, e.g., tobacco association, Ministry of Finance, researcher and journalist have been also conducted. The findings of this study showed, first, simplification of the price tiers of cigarettes will decrease the cigarettes production about 20 percent under lower purchasing power assumption. Second, the simplification will make the tobacco excise revenue fall by 2.4 percent under lower purchasing power assumption. Third, simplifying tiers will increase tobacco excise revenue by 8.5 percent under higher purchasing power. Under strategic industry policy, government policy on tobacco industry should take into consideration some factors such as production volume, national revenue and industry performance. Besides, the government should design others alternative of excise tax objects such as plastic, chlorofluorocarbon/CFC, fuel, luxury goods and sugar products.

Keywords: tobacco industry; excise tax; cigarettes tiers; simulation (search for similar items in EconPapers)
JEL-codes: E27 E61 H20 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2019-10
New Economics Papers: this item is included in nep-mac and nep-sea
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Published in Proceedings of the Proceedings of the 52nd International Academic Conference, Barcelona, Oct 2019, pages 12-23

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