Illicit trade of cigarettes is one of the narratives used by the tobacco industry to influence policy makers in order to stall tobacco regulation, particularly tobacco excise tax and price increases. However, limited research on illicit cigarette trade and the impact of increases in excise tax have resulted in ineffective policies and undermined efforts to reduce the smoking prevalence in Indonesia.
In 2018, Perkumpulan PRAKARSA conducted a nationally representative survey of 1440 smokers in 6 districts (Malang, South Lampung, Tangerang, Gowa, Bandung and Banyumas Districts). Cigarette packs were collected from 1201 survey respondents to identify illicit cigarettes through the validity of excise tapes and health warning images. This study found that the volume of illicit cigarettes in Indonesia is very small, less than 2 percent. This study also found that smokers with higher incomes were less likely to have smoked an illicit cigarette. Even though people with lower incomes were more likely to smoke illicit cigarettes, the consumption of illicit cigarettes was not a long term behavior.
Based on our findings, increase cigarette excise taxes in order to increase cigarette prices and reduce the affordability of cigarettes do not undermine the objectives of tobacco tax policies. Furthermore, Larger tax increases are more effective than smaller tax increases at reducing tobacco use.