Illicit cigarette consumption and government revenue loss in Indonesia.
Abstract
BACKGROUND: Illicit cigarettes comprise more than 11% of tobacco consumption and 17%
of consumption in low- and middle-income countries. Illicit cigarettes, defined as
those that evade taxes, lower consumer prices, threaten national tobacco control efforts,
and reduce excise tax collection. METHODS: This paper measures the magnitude of illicit
cigarette consumption within Indonesia using two methods: the discrepancies between
legal cigarette sales and domestic consumption estimated from surveys, and discrepancies
between imports recorded by Indonesia and exports recorded by trade partners. Smuggling
plays a minor role in the availability of illicit cigarettes because Indonesians predominantly
consume kreteks, which are primarily manufactured in Indonesia. RESULTS: Looking at
the period from 1995 to 2013, illicit cigarettes first emerged in 2004. When no respondent
under-reporting is assumed, illicit consumption makes up 17% of the domestic market
in 2004, 9% in 2007, 11% in 2011, and 8% in 2013. Discrepancies in the trade data
indicate that Indonesia was a recipient of smuggled cigarettes for each year between
1995 and 2012. The value of this illicit trade ranges from less than $1 million to
nearly $50 million annually. Singapore, China, and Vietnam together accounted for
nearly two-thirds of trade discrepancies over the period. Tax losses due to illicit
consumption amount to between Rp 4.1 and 9.3 trillion rupiah, 4% to 13% of tobacco
excise revenue, in 2011 and 2013. CONCLUSIONS: Due to the predominance of kretek consumption
in Indonesia and Indonesia's status as the predominant producer of kreteks, illicit
domestic production is likely the most important source for illicit cigarettes, and
initiatives targeted to combat this illicit production carry the promise of the greatest
potential impact.
Type
Journal articlePermalink
https://hdl.handle.net/10161/11600Published Version (Please cite this version)
10.1186/s12992-014-0075-7Publication Info
Ahsan, Abdillah; Wiyono, Nur Hadi; Setyonaluri, Diahhadi; Denniston, Ryan; & So, Anthony
D (2014). Illicit cigarette consumption and government revenue loss in Indonesia. Global Health, 10. pp. 75. 10.1186/s12992-014-0075-7. Retrieved from https://hdl.handle.net/10161/11600.This is constructed from limited available data and may be imprecise. To cite this
article, please review & use the official citation provided by the journal.
Collections
More Info
Show full item recordScholars@Duke
Anthony Deh-Chuen So
Visiting Professor of the Practice in the Sanford School of Public Policy
Dr. Anthony So joined Duke University’s Sanford School of Public Policy in 2004 as
director of a new Program on Global Health and Technology Access. The program focuses
on issues of globalization and health, particularly innovation and access to essential
medicines for those in developing countries. The program works as the Strategic Policy
Unit for ReAct, a global coalition dedicated to combating antibiotic resistance. Dr.
So's research on the ownership of knowledge and how it is best h

Articles written by Duke faculty are made available through the campus open access policy. For more information see: Duke Open Access Policy
Rights for Collection: Scholarly Articles
Works are deposited here by their authors, and represent their research and opinions, not that of Duke University. Some materials and descriptions may include offensive content. More info