Indonesia will raise the excise duty on cigarette products by an average of 12.5 per cent as the country seeks higher earnings from the industry.
The world's second-largest cigarette market, after China, boosted the levy as it seeks to earn 174 trillion rupiah (US$12 billion) in state revenue from tobacco products in 2021, a 5.0 per cent increase from this year's target.
The industry accounts for a majority of the government's excise revenue.
The higher levies are effective February 1, 2021.
Indonesia sets different amount of levies on various types of cigarettes, from machine- or hand-rolled as well as whether they contain cloves.
The government, which hasn't said when the new levy will be effective, hiked the duty by 23 per cent this year.
While Indonesia seeks to reduce the number of smokers, it's also mindful of workers who rely on the tobacco industry, which is why it isn't raising the levy for hand-rolled cigarettes, Finance Minister Sri Mulyani Indrawati said in the Thursday briefing.
Smoking is prevalent in the country, with a third of adults reporting regular use of tobacco.
Public health experts have argued that there's a link between Indonesia's smoking rate and its coronavirus case fatality rate.
The country reported 171 deaths from Covid-19 on Wednesday, the highest number since the outbreak began.
Shares of cigarette maker PT Hanjaya Mandala Sampoerna lost about 12 per cent so far this year as consumers rein in spending and become more wary of health concerns, while PT Gudang Garam declined 6.8 per cent.
The benchmark stock index has dropped 5.0 per cent in 2020.
The government expects cigarette production to decline as much as 3.2 per cent to 288.8 billion sticks in 2021, Indrawati said.
The country seeks to crack down further on illegally sold cigarettes, she said.
