Indonesia commits to raising tobacco taxes to fund health systems strained by tobacco and COVID-19

The Ministry of Finance, Indonesia, has released a decree containing a provision for increasing tobacco taxes. This is intended to generate revenue for the government which can be used to fund universal health care, health systems and health programmes, all of which are currently under excess strain from COVID-19, as well as the high burden of tobacco-related diseases in the country.

The provision to raise tobacco taxes is part of an implementation strategy for the National Mid-Term Development Plan 2020-2024 (decree No. 77), which was issued on 30 June 2020. In addition to tobacco taxes, the decree also includes taxes on foods that contain high amounts of sugar, salt and fat, which are also risk factors for NCDs.

The price of cigarettes in Indonesia remains one of the lowest in the world, which contributes significantly to the high smoking rate in the country. Making cigarettes less affordable through increased tobacco taxation is an evidence-based policy set out in the World Health Organization’s Framework Convention on Tobacco Control (WHO FCTC) that is proven to reduce tobacco use. It is considered a ‘win-win’ measure, because the revenue from tobacco taxation can then be allocated to strengthening health systems that are already under strain from high smoking rates.

Implementing measures that reduce tobacco use are especially important amidst the COVID-19 pandemic. Tobacco is one of the leading risk factors for non-communicable diseases (NCDs), and both NCDs and tobacco use contribute to an increased chance of contracting COVID-19, and worse outcomes from the virus.

Dr Abdillah Ahsan, University of Indonesia, stated that the provisions of this new decree regarding fiscal policy reformation to achieve economic growth and improving public health through strengthening and simplifying tobacco taxation is a key milestone for the government. 

 “The Union welcomes this decree, which comes at a vital time as the world battles the COVID-19 pandemic, with health systems and economies being put to the test,” said Dr Tara Singh Bam, Deputy Director for the Asia Pacific region at The Union.

“This new decree contains provisions to raise tobacco excise tax, simplify tax structures, and also to extend excise tax to other unhealthy products such as sugar-sweetened beverages and ultra-processed foods. These measures will all be vital in helping Indonesia to fight COVID-19, and supporting its health systems to recover from the impact of the virus. Public health and tobacco control advocates must now ensure that these provisions are implemented effectively.”

The Union has worked closely with the Ministry of Health and the Ministry of Finance in Indonesia to increase policy awareness for the benefits of tobacco taxation and tax tier simplification. In partnership with our grantees through the Bloomberg Initiative to Reduce Tobacco Control Grants Program, The Union has also been involved in providing technical and strategic guidance for the National Mid-term Development Plan 2020-2024.

The full decree is available here in Bahasa Indonesian.

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