Jakarta - Raising taxes on tobacco products in Indonesia may lead to lower cigarette consumption, fuller employment, higher economic output, and increases in government revenue, according to a study released Wednesday. The Southeast Asia Tobacco Control Alliance commissioned the study, conducted by Abdillah Ahsan, and Nurhadi Wiyono of the School of Economics at the state-run University of Indonesia, showed that tobacco tax increases of 30 to 100 per cent in Indonesia would raise cigarette prices by 7 to 26 per cent and thereby reduce cigarette consumption by 2.6 to almost 9 per cent.
"And yet, 100, 50 or 30 per cent tax increases will likely increase government revenue by 82.13, 43.3 and 24 per cent respectively. Indonesia's current tax rate is at 31 per cent," the researchers said in a statement.
The study also suggests that as people consume less cigarettes, they will tend to spend more on essential items for their health and welfare, it said.
A decline in tobacco consumption corresponds with a switch to expenditures on food items - such as meats, fish, eggs, milk and vegetables and fruits - and non-food items such as housing, goods and services, health and education, the researchers noted.
"As a result, up to 60 non-tobacco related sectors achieved net gains on economic output, employment and income," they said. In contrast, the researchers noted, cigarette manufacturing does not generate output, income, and employment as efficiently as other sectors.
The study stressed that the contributions of cigarette manufacturing and tobacco farming to the national economy tends to be less than that of other sectors.
Of 66 economic sectors studied, it showed the cigarette manufacturing and tobacco farming ranked 34th and 62nd, contributed a mere 1.4 per cent of total gross domestic product, the release said, adding that the sectors also accounted for less than 1 per cent of total national employment.
In Indonesia, tobacco use has grown over the last three decades with cigarette consumption increasing seven times from 33 billion to 220 billion sticks between 1970 and 2005.
The overall smoking prevalence today is 34.4 per cent more than the 50 million adult smokers that Indonesia had in 2004. About 63.1 per cent of Indonesian men smoke, while smoking among women is becoming more popular in urban areas, the researchers said.
Indonesia has not ratified the World Health Organization Framework Convention on Tobacco Control.
The local tobacco industry had strongly opposed the treaty, arguing that it would cause adverse impacts of tobacco control measures on national economic output, income and employment.
