The Indonesian government, through the Ministry of Finance, has set in motion a new tax policy for electronic cigarettes (REL), effective from January 1, 2024, as outlined in the Minister of Finance Regulation Number 143/PMK/2023.

This tax imposition aligns with the Law on Financial Relations (Law Number 1 of 2022) between Central and Regional Governments. It reflects the government’s commitment to providing a transitional period for the taxation of electronic cigarettes, which have been subject to excise tax since mid-2018.

Erwin Surjantoro, the Ministry of Finance highlighted the purpose of this regulation as a measure to control cigarette consumption among the public, emphasizing the need for a fair tax system that considers the operational involvement of tobacco farmers and factory workers in conventional cigarette production.

Electronic cigarettes, as stated in the Law on Tax Regulation Harmonization (Law Number 7 of 2021), are considered excisable goods. This new tax imposition aims to create equity in the treatment of conventional and electronic cigarettes in the taxation system.

The new tax will be calculated at 10% of the cigarette excise duty, as stipulated in the regulation. The collection of this tax will be conducted in tandem with the excise duty by the Customs and Excise Office.

The revenue generated from the e-cigarette tax is projected at IDR 1.75 trillion for 2023, accounting for about 1% of the total Tobacco Product Excise revenue for the year.

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At least 50% of the e-cigarette tax revenue is earmarked for public health services (Jamkesnas) and law enforcement, contributing to improved public services in the regions.

The imposition of an e-cigarette tax in Indonesia reflects the government’s effort to control tobacco consumption while generating revenue. This policy may affect Singaporeans and international visitors who use electronic cigarettes in Indonesia, both in terms of cost and availability.

Starting January 1, 2024, Indonesia will implement a new tax policy on electronic cigarettes, aimed at controlling consumption and aligning with the government’s commitment to fair taxation. This policy is part of the broader effort to harmonize tax regulations and ensure equitable treatment across different tobacco products.

Source: Batam Today, Tempo.co (2024)