INDONESIAN GOVERMENT UP RETAIL BASE PRICES OF CIGARETTES
Source: The Jakarta Post
Date: March 4, 2006
The cash-strapped government said Friday it would raise the base prices of cigarettes by 10 percent starting next month to boost excise revenue needed to help finance the state budget."We expect this hike will increase excise revenue by Rp 1 trillion (US$108.6 million) this year," Finance Minister Sri Mulyani Indrawati said, adding the move was not intended to curb the number of smokers.
The government sets the minimum retail price of cigarettes at which producers can sell them to consumers. The price is a benchmark used by the government to calculate excise revenue, and an increase in the base price would boost the government's excise revenue. But the new ruling did not change the current excise tax levels of between 4 and 40 percent. The Finance Ministry sets different levels of excise rates for cigarettes, based on the total annual output of the companies, whether the products are hand-rolled or machine-rolled, and whether they contain cloves or not.
Machine-rolled cigarettes, for instance, are subject to a 40 percent excise, while hand-rolled are taxed at 22 percent. Analysts said the hike in the base price, the second after an average 20 percent increase in July, would negatively affect the revenue of local cigarette manufacturers PT Gudang Garam and PT HM Sampoerna, which were stung by last year's double fuel price hikes, high interest rate environment and weakening purchasing power of the public. The government is also planning to raise electricity rates this year. "Top-tier companies will be hurt because the consumer may choose cheaper unbranded cigarettes," Rani Sofjan, head of research at PT Mandiri Sekuritas, was quoted as saying by Bloomberg. "Gudang Garam is more vulnerable than Sampoerna because it's targeting the mass market while Sampoerna with its A-Mild brand is targeting urban buyers, who are more resilient."
The country's largest cigarette maker, Gudang Garam, closed up 1.4 percent at Rp 11,300, off an intraday high of Rp 11,400 as profit-taking emerged on news of an increase in the base prices of cigarettes.
Date: March 4, 2006
The cash-strapped government said Friday it would raise the base prices of cigarettes by 10 percent starting next month to boost excise revenue needed to help finance the state budget."We expect this hike will increase excise revenue by Rp 1 trillion (US$108.6 million) this year," Finance Minister Sri Mulyani Indrawati said, adding the move was not intended to curb the number of smokers.
The government sets the minimum retail price of cigarettes at which producers can sell them to consumers. The price is a benchmark used by the government to calculate excise revenue, and an increase in the base price would boost the government's excise revenue. But the new ruling did not change the current excise tax levels of between 4 and 40 percent. The Finance Ministry sets different levels of excise rates for cigarettes, based on the total annual output of the companies, whether the products are hand-rolled or machine-rolled, and whether they contain cloves or not.
Machine-rolled cigarettes, for instance, are subject to a 40 percent excise, while hand-rolled are taxed at 22 percent. Analysts said the hike in the base price, the second after an average 20 percent increase in July, would negatively affect the revenue of local cigarette manufacturers PT Gudang Garam and PT HM Sampoerna, which were stung by last year's double fuel price hikes, high interest rate environment and weakening purchasing power of the public. The government is also planning to raise electricity rates this year. "Top-tier companies will be hurt because the consumer may choose cheaper unbranded cigarettes," Rani Sofjan, head of research at PT Mandiri Sekuritas, was quoted as saying by Bloomberg. "Gudang Garam is more vulnerable than Sampoerna because it's targeting the mass market while Sampoerna with its A-Mild brand is targeting urban buyers, who are more resilient."
The country's largest cigarette maker, Gudang Garam, closed up 1.4 percent at Rp 11,300, off an intraday high of Rp 11,400 as profit-taking emerged on news of an increase in the base prices of cigarettes.
posted by Zumrowi Yunus at
10:49 AM
0 Comments:
Post a Comment
<< Home