Finance Minister Purbaya Yudhi Sadewa emphasized that the excise tariff on tobacco products and the retail selling price (HJE) of cigarettes will not be increased in 2026. This certainty was conveyed in order to maintain the stability of the tobacco products industry which still plays a major role in the national economy. The policy is a continuation of the government's move the previous year, which also did not increase cigarette excise.
Purbaya stated that there will be no retail price adjustment when the excise tariff does not increase. He emphasized that the government wants to maintain fiscal policy consistency so as not to confuse business actors and the public.
"I have calculated the reason why. Because I don't want our industry to die. Then, we let the illegal ones live," said Purbaya, quoted by Antara, Wednesday (29/10/2025).
In addition to setting fiscal policy, the government is also preparing a strategy to reduce the circulation of illegal cigarettes in the domestic market. This effort is directed so that all business actors, including small and medium-scale producers, can enter the official system that is monitored. The Ministry of Finance plans to implement the measure by the end of the year after discussions with industry players.
Purbaya explained that the government tries to maintain a balance between economic aspects, state revenue, and public health in formulating excise policies. He realizes that this decision has caused different views in the community, especially from those who highlight the health impacts. The government continues to encourage consumption control through education that is carried out in stages.
The government is also preparing a big concept to eradicate illegal cigarettes both from within and outside the country. Purbaya explained that most illegal cigarettes are produced by small and medium-scale actors, so in the future they will be directed to enter a special area that is legal and supervised. Purbaya said that discussions with business actors have been held and the execution of the program is planned for December 2025.
The Indonesian Eliquid Manufacturers Association (IETA) expressed support for the government's decision to withhold an increase in excise rates in 2026. The policy is considered to provide room for recovery for the industry after several years of pressure on production costs and regulatory adjustments. This step is considered a positive signal for the sustainability of the eliquid sector in the country.
PPEI Chairman Daniel Boy Purwanto said that the decision shows the government's attention to the condition of the industry which is still adapting to market dynamics. "With tariffs that do not increase, industry players can focus on improving quality and strengthening competitiveness," he said in a PPEI statement listed on its official website, October 14, 2025.
According to Daniel, the stability of excise tariffs also plays a role in maintaining selling prices so that they remain affordable for consumers and do not suppress demand. He assessed that this situation could open up opportunities for business actors to expand their markets domestically and abroad. In addition, he hopes the government will actively involve industry associations in the policy formulation process.
IETC considers that with no tariff increase, eliquid producers have a wider opportunity to increase production capacity and strengthen the national supply chain. Stable conditions are expected to encourage product innovation and help businesses maintain price balance in the domestic market.
First Bank Chief Economist Josua Pardede believes that the pause in excise tax increases in 2026 can be a momentum for micro, small and medium enterprisesUMKM) in the e-cigarette industry to strengthen their business foundations. Josua emphasized the importance of improving legality, quality standards, and transparent trade systems so that industry players are ready to face tightening non-fiscal regulations.
"UMKM that comply early on, use verified raw materials, and organize licensed distribution will be more resilient in the face of tightening regulations, and more easily access formal financing," said Josua when contacted on Thursday (30/10/2025).
According to Josua, the decision to hold excise tariffs and HJE is a tactical policy that provides breathing room for the labor-intensive sector and reduces price pressure on the market. He added that this step also helps reduce the inflation risk of consumer goods for low-income households. However, the effectiveness of the policy will largely depend on monitoring and structuring the tariff structure so as not to open loopholes for illegal products.
From the fiscal side, Josua explained that the growth of excise revenue next year will depend more on the increase in legal volume and law enforcement against the circulation of illegal cigarettes.
The government needs to replace the effect of tariff increases with administrative improvements and compliance strengthening to maintain revenue targets. "The 2026 Draft State Budget still targets an increase in excise revenue and rests the policy on four pillars: consumption control, revenue, labor protection, and supervision of legal goods," he said.
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Josua considers the importance of clarity in the multi-year excise road map so that fiscal policy remains measurable and does not cause uncertainty for the industry. The government, for him, needs to accelerate the digitalization of the monitoring system and encourage partnerships between business actors and tobacco farmers to strengthen the labor-intensive sector.
With risk-based supervision and consistent policy support, the balance between state revenue, labor protection, and consumption control can be maintained sustainably.
Critique
Meanwhile, Senior Researcher at the University of Indonesia's Institute for Economic and Social Research (LPEM) Vid Adrison believes that the government's decision not to raise cigarette excise taxes in 2026 shows greater favoritism to industry than public health. Excise tax should function as a consumption control instrument because cigarettes are classified as products that have a negative impact on health.
"The main purpose of excise is control. With excise, the price becomes higher so that consumption can be reduced," Vid said.
According to Vid, the decision to hold the excise tax rate will make it difficult to reduce smoking prevalence, especially among young people. Vid believes that prices that remain affordable have the potential to open up opportunities for minors to buy cigarettes in the market.
This condition, according to him, shows that the current direction of fiscal policy emphasizes industrial protection rather than controlling consumption and public health.
Vid also highlighted the gap between classes in the excise tariff structure, which is still considered too wide. The difference in excise rates between class one and two cigarette products, which reaches around 60%, according to him, encourages consumers to switch to products with lower excise taxes and has the potential to reduce state revenues. "If you want to reduce, then reduce the gap. It should not be that big a difference between groups one and two," he said.