TY - JOUR
T1 - Illicit cigarette consumption and government revenue loss in Indonesia
AU - Ahsan, Abdillah
AU - Wiyono, Nur Hadi
AU - Setyonaluri, Diahhadi
AU - Denniston, Ryan
AU - So, Anthony D.
N1 - Funding Information:
Acknowledgement This project received support from the NIH Fogarty International Center (Grant Number R01TW007924), awarded to Duke University's Program on Global Health and Technology Access in collaboration with the Southeast Asian Tobacco Control Alliance and the American Cancer Society. The content is solely the responsibility of the authors and does not necessarily represent the official views of the Fogarty International Center or the National Institutes of Health. We wish to thank Prof. Joy Townsend and Ms. Bungon Ritthiphakdee for their valuable comments on methods and analysis during the research process.
Funding Information:
This project received support from the NIH Fogarty International Center (Grant Number R01TW007924), awarded to Duke University's Program on Global Health and Technology Access in collaboration with the Southeast Asian Tobacco Control Alliance and the American Cancer Society. The content is solely the responsibility of the authors and does not necessarily represent the official views of the Fogarty International Center or the National Institutes of Health. We wish to thank Prof. Joy Townsend and Ms. Bungon Ritthiphakdee for their valuable comments on methods and analysis during the research process.
Publisher Copyright:
© 2014 Ahsan et al.
PY - 2014
Y1 - 2014
N2 - 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.
AB - 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.
KW - Cigarette
KW - Illicit
KW - Indonesia
KW - Kretek
KW - Tax loss
UR - http://www.scopus.com/inward/record.url?scp=84964698003&partnerID=8YFLogxK
U2 - 10.1186/s12992-014-0075-7
DO - 10.1186/s12992-014-0075-7
M3 - Article
C2 - 25406595
AN - SCOPUS:84964698003
VL - 10
JO - Globalization and Health
JF - Globalization and Health
SN - 1744-8603
IS - 1
M1 - 75
ER -