The Indonesian government has recently announced a major hike in taxes on electronic cigarettes. Associated products, such as charging kits and e-juice, will also be impacted. The reason for this decision? Compensating for fiscal deficits caused by reduced cigarette sales…
Electronic cigarettes are taking more and more market shares from conventional cigarettes. This trend is proving strong throughout the world, and Indonesia is no different. Faced with this situation, the government is worried about the budgerary impact of this fiscal deficit. They have found a solution, however: starting in summer of 2018, e-cigarette taxes will be raised by 57%!
65 % of the male population of the country smokes regularly, in particular clove cigarettes. E-cigarettes have proven highly popular, and the market is reacting accordingly. With this tax hike, the government seems dedicated to pushing back against this emerging industry. Tobacco sales have considerable weight in the Indonesia’s fiscal revenue.
Indonesia, where tobacco is king
Tobacco sales represent a major share of the national economy. Even today, the country pushes the industry to develop, with exceptionally low prices on cigarette packets. The growing success of e-cigarettes is an alarming trend to Indonesian authorities. In fact, the Indonesian Health Minister considers that electronic cigarettes are just as dangerous as traditional smokes.
After this announcement, the Indonesian vaping association was quick to react. According to the association, this hike is an attempt to kill the electronic cigarette industry before it becomes too big to stop.
With fiscal revenues evaluated at 8.6 billion euros, tobacco is an essential taxable good for the local economy. For those in the country who vape, this price increase will be difficult to absorb.