Life is Healthy

A laborer lifts a crate of beer at Sunda Kelapa port in Jakarta on Monday. (Reuters Photo/Beawiharta)

Just over a week after the country’s producers of alcoholic beverages applauded the government’s move to scrap the luxury tax on their products from April, they are now indignant over the government’s sudden decision to increase the excise tax by up to threefold.

A Finance Ministry decree signed on March 17 but released only on Tuesday raised the excise tax on alcoholic beverages by 100 percent to 214 percent, depending on their alcohol content. The luxury tax currently imposed on alcoholic beverages ranges from 40 percent to 150 percent of their sales price.

“We appreciate the government’s efforts in scrapping the luxury tax on alcoholic beverages, but the increase in the excise is just way too much,” Ipung Nimpuno, a representative of the Indonesian Malt Beverages Association (GMMI), told the Jakarta Globe.

He said the increase in the excise tax could undermine the objective behind scrapping the luxury tax: reducing the black market in alcoholic beverages.

“I haven’t figured out how much is the proper excise the government should charge in order to compensate for the scrapped luxury tax, but the current figure is too much,” Ipung said. He added that he expected prices of alcoholic beverages to increase by 20 percent to 40 percent with the new excise duty.

The government divides alcoholic beverages into three categories: type A, containing up to 5 percent of alcohol, type B, with 5 percent to 20 percent, and type C, with more than 20 percent.

The new decree raises the excise tax on domestically produced type A drinks from Rp 3,500 (38 cents) per liter to Rp 11,000. The excise on type B beverages is increased from Rp 10,000 to Rp 30,000 per liter and on type C beverages from Rp 25,000 to Rp 75,000 per liter.

Meanwhile, for imported alcoholic drinks, the excise for type A is increased from Rp 5,000 to Rp 11,000 per liter, for type B from Rp 20,000 to 40,000 per liter and type C from Rp 50,000 to Rp 130,000 per liter.

The decree says the new excise tax rate is aimed at compensating for the expected drop in revenue from the abolition of the luxury tax on alcoholic beverages.

Ipung said that when the luxury tax was still in place, Indonesian brewers had been contributing about Rp 4 trillion annually to the state coffers.

“With the luxury tax scrapped and the excise tax increased, we [GMMI] predict that beer producers will now have to contribute Rp 4.8 trillion yearly,” he said.

Evi Suhartantyo, a spokesman for the Directorate General of Customs, said the current level of excise duty for alcoholic beverages was “ideal.”

“Objects that are charged with excise have their excise tax increased every year, because it is done to protect the health and well-being of our people,” Evi said.

He added that because the issue was related to health, consumption should be limited, as with cigarettes. The tax on cigarettes is increased by 10 percent to 30 percent yearly.