Indonesia’s finance minister announced that tobacco excise rates will remain unchanged in 2026 to prevent layoffs and protect industry employment. The government says it will pivot to cleaning up the illicit cigarette market, noting that while tax hikes can curb smoking, they have also pushed consumers toward cheaper brands or smuggled products, hurting compliant businesses and tax revenues.
Key Points
- Tobacco excise rates will remain at current levels in 2026 to stabilize the sector and safeguard jobs.
- Authorities will prioritize enforcement to “clean up” the illicit cigarette market.
- No increase was made in 2025; before that, taxes had been raised almost annually since 2014 to curb smoking.
- A 2023 Health Ministry survey found that about 7.4% of smokers are aged 10–18.
September 28, 2025 — According to Reuters, Indonesia’s Finance Minister Purbaya Yudhi Sadewa said the government has decided to keep tobacco excise rates unchanged in 2026 to avoid layoffs and protect employment in the cigarette industry. “We have decided not to increase the excise rate on tobacco products next year, but we will clean up the market for illegal tobacco products,” he told reporters following discussions with the national cigarette manufacturers’ association.
The minister emphasized that the government will shift its focus to tackling illicit cigarettes. Indonesian authorities noted that while certain tax hikes have some effect in reducing smoking, they have also prompted consumers to “trade down” to cheaper brands or turn to illegal channels, thereby undermining compliant businesses and tax collections.
In context, Indonesia did not raise tobacco excise in 2025; before that, increases were introduced almost every year since 2014 to curb smoking, particularly among youth. According to a 2023 survey by the Health Ministry, of the roughly 70 million smokers nationwide, 7.4% are aged 10–18.
