Difference between Cigarette Tax and Excise

Bambang is an active smoker. One morning he went to a shop near his house to buy a pack of cigarettes. After buying cigarettes, he returned home, then he sat on the sofa and immediately watched a news on television while smoking.

Then Bambang saw a news item entitled “Plan to Increase Cigarette Excise Tariffs, 78,000 Cigarette Industry Workers Will Be Affected” on his television screen. Bambang then started to get nervous and immediately muttered, “Everything goes up, the price of basic necessities goes up, even the cigarette tax that is reported on has increased, the price of cigarettes could be 25 thousand a pack.”

What Bambang complained about, according to the author, was not quite right. The main news that Bambang watched was about cigarette excise, however, Bambang complained about the cigarette tax. It seems that Bambang still has not found the difference between tax and excise, in this case cigarette tax and cigarette excise. The author here will not discuss the truth of the news that Bambang is watching, however, the author would like to invite readers to look for the meaning, similarities and differences between taxes and excise, especially cigarette taxes and cigarette excise.

Definition of Tax and Excise According to the Law

Based on Law (UU) No.11/1995 jo. Law No.39/2007, excise is a state levy imposed on certain goods that have the nature or characteristics stipulated in the Excise Law. One of these properties or characteristics is that its use can have a negative impact on society or the environment. Examples of excisable goods are ethyl alcohol (EA) or ethanol, beverages containing ethyl alcohol (MMEA) and tobacco products.

Meanwhile, according to Article 1 of the Tax KUP Law, taxes are mandatory contributions to the state owed by individuals or entities that are coercive under the law, without receiving direct compensation and are used for the needs of the state for the greatest prosperity of the people.

Cigarette Excise as State Revenue

Excise has long been levied both in Indonesia and abroad. In Indonesia, excise is levied by the Directorate General of Customs and Excise. Excise is often referred to as a sin tax. According to experts, sin tax is an excise that is levied on social behavior, in this case behavior that is considered negative from a moral perspective.

In addition, excise is considered an externality tax or pigovian tax. This pigovian tax is applied to an economic behavior that can cause a negative side to other economic activities. This Pigovian tax is widely applied in countries in the European region.

Excise currently has a fairly large portion of state revenue from taxes, which is around 9-10 percent or around 143 trillion rupiah, according to data from the Government Goods/Services Procurement Policy Institute (LKPP) in 2016.

In 2021, the government has set an excise rate policy for tobacco products such as cigarettes. Based on the government’s considerations in this pandemic situation, in detail, the increase in the excise tariff for machine-made kretek cigarettes (SKM) is 16.9% for class I, 13.8% for class II A, and 15.4% for class II B. Machined White Cigarettes (SPM) are 18.4% for group I, 16.5% for group II A, and 18.1% for group II B.

The subject of cigarette excise duty is the manufacturer or importer. While the object of excise duty on cigarettes is tobacco products, which include cigarettes, cigars, leaf cigarettes, sliced ​​tobacco, and other tobacco processing products.

Also, based on Article 1 PMK No.146/PMK.010/2017 jo. PMK No. 152/PMK.010/2019, which is the basis for calculating excise duty is the Retail Selling Price (HJE).

Cigarette Tax as State Revenue

Taxes have a very important role in state revenue. In Indonesia alone, the realization of tax revenues in 2020 reached 1,070 trillion rupiah or equal to 89 percent of the APBN target. State revenues from taxes have gradually recovered since the drastic decline in tax revenues due to the Large-Scale Social Restrictions (PSBB) in May 2020.

In contrast to cigarette excise, according to Article 27 of Law No. 28/2009, the subject of cigarette tax is cigarette consumers. Meanwhile, the object of the cigarette tax is cigarette consumption. Also, based on Article 28 of Law No. 28/2009, the basis for the imposition of cigarette taxes is the excise set by the government on cigarettes.

Conclusion

The author argues that excise duty and tax are very closely related, although they look the same but can be distinguished. To distinguish these two things, it is better to look at the laws and regulations in Indonesia because they contain the subject and object of each tax or excise.

However, the author does not deny that cigarette taxes and cigarette excise taxes, maybe in other countries are the exact same thing and cannot be distinguished, depending on the policies of each country.

According to the author, taxes and excise can be used as regulatory tools. The author hopes that the imposition of cigarette taxes and cigarette excise in Indonesia can reduce the consumption of products that have certain characteristics and characteristics, such as cigarettes that can have a negative impact on humans and the environment. The same applies to the carbon tax which will be implemented in April 2022.