Cigarettes Are The Biggest Expenditure Of Indonesian Households

a man is enjoying a cigarette

Indonesian people are known for their penchant for smoking. Cigarettes are even the largest component in household expenses, putting aside other needs. For this reason, an increase in cigarette excise rates is deemed necessary.

This was conveyed by the Minister of Finance Sri Mulyani. She said that the high consumption of cigarettes has a serious negative impact on households. The reason is, the more consumption of cigarettes, the allocation for other expenditures will decrease.

“The high consumption of cigarettes is a dilemma of how to influence household consumption to prioritize more nutritious goods, especially those needed by children so they can be healthier and better,” said Sri Mulyani in a joint working meeting with Commission XI DPR, Monday (12/12/2022).

Based on March 2022 Susenas data from the Central Statistics Agency (BPS), cigarettes are the second highest component of household expenditure. In urban areas, its component reaches 12.21 percent while in rural areas it covers 11.63 percent.

BPS noted that an average poor household spends Rp. 246,382 per month for cigarettes. In fact, the money can be used to buy nutritious food, so that the quality of households can be better.

Meanwhile, the Center for Social Security Studies at the University of Indonesia (PKJS-UI) notes that every 1 percent increase in cigarette spending will increase the likelihood of a household becoming poor by up to 6 percent.

Furthermore, the increase in cigarette excise rates is one step in reducing the level of consumption and production of cigarettes.

Control is important to maintain public health conditions. President Joko Widodo determined that the weighted average increase in CHT rates for 2023 and 2024 is 10 percent and for the hand-rolled kretek cigarette (SKT) category a maximum of 5 percent.

Sri Mulyani stated that the policy of increasing cigarette excise rates would affect inflation and economic growth. The reason is that the excise tax policy will increase the price of tobacco products, while cigarettes are one of the goods consumed by many people.