Macroeconomic impact of tobacco taxation in Indonesia

Abstract

BackgroundA significant tobacco tax increase has long been advocated to reduce Indonesia’s high smoking prevalence. However, implementing such a policy remains challenging due to the tobacco industry’s argument that it would negatively impact the economy.ObjectiveThis study aims to provide a comprehensive estimate of the net impact of tobacco taxation on Indonesia’s economy.MethodThe impact of the tax hike on the economy is simulated through a change in cigarette demand and reallocation of household’s budget and allocation government spending from additional tobacco tax revenue. Input-output analysis is employed to estimate the net effect of the tobacco tax rise on the total economic output, income and employment in Indonesia.FindingIncreasing the tobacco tax would generate a net positive impact on the economy as it would increase economic output, household income and employment. The positive impact is mainly driven by government spending from additional revenue from increased tobacco taxes. Spending tax revenue using the current structure of government spending has the potential to generate the optimal economic effect. Increasing tobacco tax by 45% from the 2019 tax level would increase economic output, household income and employment by Rp84.2 trillion, Rp24.1 trillion and 400.3 thousand jobs, respectively.

From capacity building to collaboration in tobacco economics research

“…Several papers estimated the impact of tobacco on household spending and poverty (Macías Sánchez et al , 16 Mugosa et al , 17 Swarnata et al , 18 Vladisavljevic et al 19 ) as well as the overall burden on health care systems and economies (Gligorić et al , 20 Memon et al 21 ). Other research analyzed the macroeconomic impacts of tobacco taxes (Bella et al , 22 Cicowiez et al 23 ) and the illicit tobacco market (Divino et al , 24 Szklo et al 25 ).…”

“…editorial al 19 ) as well as the overall burden on health care systems and economies (Gligorić et al, 20 Memon et al 21 ). Other research analyzed the macroeconomic impacts of tobacco taxes (Bella et al, 22 Cicowiez et al 23 ) and the illicit tobacco market (Divino et al, 24 Szklo et al 25 ). concLusIon This background paper has described seven important lessons learnt in the transition of this project from capacity building to collaboration on tobacco economics research.…”

From Leaf to Lip: Tracing Contaminants in Aceh's Traditional Chewing Tobacco (Bakông Asóê)

“…Indonesia is globally recognized for its vast tropical forests and biodiversity [1][2][3], including tobacco (Nicotiana tabacum L.) [4]. In 2019, Indonesia had a total national tobacco production of 197.40 thousand tons, making it one of the most widely cultivated crops in the country.…”