Finance Minister Plans Special Tax to Curb Illegal Cigarettes in Indonesia

November 3, 2025 | 10:17 pm

TEMPO.CO, Jakarta - Indonesian Finance Minister Purbaya Yudhi Sadewa plans to prepare a special tax rate for domestic illegal cigarettes. This is done to prevent the entry of illegal cigarettes from abroad into Indonesia.

"We will organize the market. Close our market to illegal goods. For domestic cigarette producers who are still illegal, we invite them to enter the legal system of the Tobacco Industry Zone, which we will establish and encourage with certain tariffs. Maybe it will be operational by December," said Purbaya, as quoted by Antara on Monday, November 3, 2025.

According to him, this policy will be implemented because the circulation of foreign illegal cigarettes has been proven to kill the domestic legal cigarette production, which has been subject to high taxes. He mentioned that the illegal foreign cigarettes come from China and Vietnam.

"They say that Indonesians should stop smoking. The policies were designed to increase taxes to a very high level. But in reality, people still smoke, and what happens is that illegal goods enter," Purbaya stated.

As a result, the public health aspect remains unattended due to the high circulation of illegal foreign cigarettes consumed by the public. "If that's the case, then what is the policy for? We are killing the domestic legal cigarette industry, but reviving illegal cigarettes from abroad. In that case, I lose. I don't want to lose," said Purbaya.

He assured that strict action will be taken if there are still those caught distributing illegal cigarettes in Indonesia. "Once the policy is implemented, the players who were once operating in the dark, if they are still in the dark, we will crack down on them. There is no more compromise in that situation," he said.

Finance Minister Purbaya reaffirmed the government's commitment to regulating illegal cigarette producers and distribution while also opening opportunities for small businesses. The goal is to ensure that they operate legally and do not disrupt the market, thereby promoting fair competition in the cigarette industry.

"The government's efforts are not just about enforcement, but also to provide space for businesses that have been operating in the 'dark' or illegally to legalize their operations," he said.

If they do not have capital, he said, the government will assess how much assistance can be given, with the hope that illegal cigarette producers can enter the legal market. However, if they persist in illegal operations, then the Customs will take strict action.

Purbaya stated that after being allowed to improve, supervision and enforcement will be tightened to create fair competition. Furthermore, the Ministry of Finance is currently studying the most appropriate mechanisms for small companies to survive without unfairly disrupting the market.

In other words, facilities are being provided for illegal business operators to move to legal business spaces such as the Small Tobacco Industry Environment (LIK-IHT) area in Kudus. Ultimately, all activities will be registered and monitored.

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