Evaluating State Cigarette Excise Tax Revenues: Insights into Estimation Methods and Revenue Leakage
Jordan Putra Cahyono (a*), Damia Liana (b), Karolinda Kidi Mukin (c)

a) Master of Economics, Faculty of Economics and Business, Airlangga University
*jordan.putra.cahyono-2023[at]feb.unair.ac.id
b) Master of Economics, Faculty of Economics and Business, Airlangga University
damia.liana-2023[at]feb.unair.ac.id
c) Master of Economics, Faculty of Economics and Business, Airlangga University
karolinda.kidi.mukin-2023[at]feb.unair.ac.id

Abstract

This research analyzes state cigarette excise tax revenues in Indonesia, focusing on revenue estimation and potential leakage. Despite significant excise tax contributions, discrepancies between cigarette production, consumption, and tax revenue highlight potential issues with illicit trade. The research aims to estimate cigarette consumption and analyze potential revenue from illegal cigarettes due to consumption shifts. Using quantitative descriptive methods and data from relevant agencies, the study found that the 2023 excise tax revenue of 221.85 trillion rupiahs did not align with the estimated consumption of 28.14 trillion cigarettes. Projections indicate illegal cigarette circulation may increase to 16.89% in 2024, potentially generating 3.85 trillion rupiah in uncollected taxes. The findings underscore the need for a holistic policy approach to balance revenue goals, consumption control, and illicit trade prevention while preparing for long-term economic transitions.

Keywords: cigarette excise tax, illicit trade, tax revenue, consumption shifts, tobacco control policy.

Topic: Public economics