FISCAL POLICY OFFICEMINISTRY OF FINANCE

Excise Policy in Indonesia

Philosophy of Excise Tobacco Alcohol beverages

Article 2 of Law No. 39/2007 state goods be a subject ofexcise if have characteristics that:1.Consumption controled.2.Circulation need to be monitored.3.Usage cause a negative impact on society or theenvironment.4.Usage needs levies on behalf of justice and balance.

Philosophy of Excise: Law No. 39/2007: Law No. 39/2007

Tobacco Benchmark Proportion of Charges

Against Excise HTP Market share Evolution of excise policy Excise tariff and revenue

Harga per bungkus@ 20 batang dalam USD

31.6% 33.1%37.8%

47.0% 47.6% 48.2%51.1% 51.8%

55.4%59.3% 61.4% 61.7%

69.3%73.3%

84.3%

0%10%20%30%40%50%60%70%80%90%

Russia

India

Vietna

m

Bangla

desh

China

Philipp

ines

Indon

esia

Ukraine

Pakist

anEgy

ptBraz

il

Mexico

Thaila

nd

Turkey

Poland

(2.70)(2.29)(1.66)(2.10)(1.52)(0.49)(0.29(0.83)(1.25)(0.65)(0.60)(0.25)(0.67(1.22)(0.92)

Benchmark Proportion of Charges Against Excise HTP in SeveralStates Selling Cigarettes, End of July 2009

Source : Bloomberg Initiative

Benchmark Cigarette Tax burden in Select Countries(In Percentage of HTP), July 2009

Sumber : Bloomberg Initiative

Market share

Source: Nielsen Retail Audit Results (June 2010)

Evolution of Tobacco Excise Policy

Significant changes occurred in 1974, from single tomulti-rate tariffs and the presence of entrepreneursmanufacturers (GPP)

Until November 2006 the tariff system is advalorem In December 2006 until January 2009 the tariff system

mixed Adv & specific Minister of Finance Decree No. 134/PMK.04/2007

Since February 2009 full-specific excise tax Minister of Finance Decree No. 203/PMK.011/2008 Minister of Finance Decree No. 181/PMK.011/2009 Minister of Finance Decree No. 99/PMK.011/2010

!""# !""$ !""%

&'()*+,)-)./0.'1'2 ./0.'1'2

simplifymoderategradually

Existing: 19 stratas (layers)

1.

2.

1) considering tobacco industry roadmap:in 2007-2010, priority to the aspects of labor than state revenues and health

2) Strata (restriction) HJE (banderol price) to excise tariff rates in 19 stratas3) Application of full-specific excise tax rates by considering the type of

Tobacco (SKM = kretek machine made,SPM = white machine made,SKT =kretek hand made), the amount of production, and prevailing HJE

4) Simplication of excise rates in 2009, by reducing the gap:a. Machinery cigarette industries (SKM & SPM) into 2 class:

1) Class I: 2 (two) billion sticks to top2) Class II: less than 2 (two) billion sticks

b. Hand made Cigarette industries (SKT) remained 3 Class3) Tax burden is significantly increased 5% to 63%4) SPM and SKM excise rate abolished gradually became a machine-made

cigarette

Excise on Cigarette policies 2010

Excise tariff 2010

661- 310631-660 300600-630 280431- 230

381-430 195374-380 155

601- 310451-600 275375-450 225301- 200

255-300 165217-254 105

591- 215551-590 165520-550 145380- 105

350-379 95336-349 90

III 234-- 65

Tariff/ Stick

SPM

I

II

SKT

I

II

Type Class Range HJE/ Stick

SKM

I

II

Source: Minister Decree No. 181/PMK.011/2009

Sumber : Ministry of Finance, processed.

!"#$%%"&'(%)*+&

,+-+./+'(%)*+ !$(&,+-+./+

012"34&5/46&

3+-+./+

7789:7; ;;<8=;; >?=8=<7; @>8@A:9

B+3*+.4$*+& 78:=C >87<C =<:87>C

!$#D+&E"12$3)*".&"F&,+-+./+&'(%)*+&4"#$%%"&,+*/D4*

&"F&,+-+./+&<A@A&53$F4&G/HI+4

Excise revenue

Source: Ministry of Finance, processed.

*) realization to 23 September 2010 (81.97% of the target APBNP 2010)**) Draft Budget data 2011

Revenue of Tobacco Excise and Production

Alcohol Beverages Comparison with other countries Excise tariff

Beer: tax structure and rates landscapeDifferent taxation structures and rates across Asia-Pacific

Local currencies converted into Thai Baht equivalent (eTHB) to allow rate comparison

Whisky: tax structure landscapeDifferent tax structures and rates across Asia-Pacific can be readily discerned

Local currencies converted into Thai Baht equivalent (eTHB) to allow rate comparison

International comparison of alcohol taxAd valorem and combined/mixed tax systems are more prevalent in Asia-Pacific

http ://www.depkeu.go.id

Tax on beverages until 2006 (domestic)Tax on beverages until 2006 (domestic)

*) Minister Decree No. 90/PMK.04/2006 ,October 13, 2006

http ://www.depkeu.go.id

Class Alcoholpercentages

TARIFFExcise per

litre (specific) VAT Lux. tax

A1 s/d 1% Rp 2.500 10% 40%

A2 >1% s/d 5% Rp 3.500 10% 40%

B1 >5% s/d 15% Rp 5.000 10% 40%

B2 >15% s/d 20% Rp 10.000 10% 40%

C >20% s/d 55% Rp 26.000 10% 75%

18

Tax on beverages current (domestic)Tax on beverages current (domestic)

Class Alcohol PercentagesTARIFF

Excise per litre(specific) VAT

A s/d 5% Rp 11.000 10%

B >15% s/d 20% Rp 40.000 10%

C >20% Rp 130.000 10%

http ://www.depkeu.go.id

*) Minister Decree No. 62/PMK.011/2010 ,March 17, 2010

Tax on beverages until 2006 (imported)Tax on beverages until 2006 (imported)

http ://www.depkeu.go.id

Class AlcoholPercentages

TARIFF

Import Duty Excise per litre(specific) VAT Lux. tax

A1 s/d 1% 40% Rp 2.500 10% 40%

A2 >1% s/d 5% 40% Rp 5.000 10% 40%

B1 >5% s/d 15% 150% Rp 20.000 10% 40%

B2 >15% s/d 20% 150% Rp 30.000 10% 40%

C >20% s/d 55% 150% Rp 50.000 10% 75%

20

*) Minister Decree No. 90/PMK.04/2006 ,October 13, 2006

Tax on beverages current (imported)Tax on beverages current (imported)

http ://www.depkeu.go.id

Class Alcoholpercentages

TARIFF

Import Duty Excise per litre VAT

A s/d 5% Rp 14.000 Rp 11.000 10%

B >15% s/d 20% Rp 55.000 Rp 40.000 10%

C >20% Rp 125.000 Rp 130.000 10%

21

*) Minister Decree No. 82/PMK.011/2010 , April 7, 2010

Thank YouThank You