Firms Fight Indonesia Tax Increase (fwd)

[Robert Weissman <rob@essential.org>]

April 9, 1999

 Indonesia Non-Clove Cigarette Makers
 Urge Govt To Review Tax

 Dow Jones Newswires

 JAKARTA -- Indonesian non-clove cigarette manufacturers association,
 or Gaprindo, urged the government Friday to review the new cigarette
 excise tax as they claim it will destroy the cigarette market and cut its
 production volume by 95% this year.

 Chairman Muhaimin Moefti said in a statement that the new excise tax will
 force the non-clove cigarette manufacturers to raise prices of some of their
 brands steeply, thus making their products not competitive.

 "Under the new scheme, retail prices of white cigarette will be increased by
 300% within one or two years transaction period," he said.

 He reminded the government that the cigarette market is highly price
 sensitive, so that the new excise scheme will distort the entire market
 structure and will result in the closure of many white cigarette companies.

 The cigarette excise tax regulations which took effect April 1, standardized
 excise taxes paid by manufacturers of the locally popular clove cigarettes
 and those producing standard cigarettes.

 According to Gaprindo, a system based on price is more ideal as it is
 consumer-oriented and is in line with the definition of excise, which
 depends on consumer.

 This system allows free pricing of cigarettes by manufacturers, achieve
 excise revenue targets, maintain the employment levels and avoid shut
 downs, he said.

 Earlier, an Indonesian unit of cigarette manufacturer Rothmans has
 attacked new tax rules saying they unfairly discriminate against foreign firms
 and will reduce the government's tax intake.

 Peter Barton, president director of PT Rothmans of Pall Mall Indonesia,
 said the new cigarette excise tax would seriously undermine his company's
 business.

 -By Edhi Pranasidhi; 6221 350 0145; epranasidhi@ap.org