Evaluation of Indonesian Economic Condition Relating to the
Excise and Tax from Tobacco and Cigarettes to Health Financing
in National Health Insurance Program
Dwi Ratna Paramitha
Faculty of Public Health, Universitas Airlangga, Mulyorejo, Surabaya, Indonesia
Keywords: Indonesian health economic, Tobacco control, Excise and tax, Health financing, National health insurance.
Abstract: The Indonesian economic is largely supported by excise and taxes from tobacco and cigarettes. The number
of tobacco companies in Indonesia, as well as the high consumption of cigarettes causes problems,
especially in the health sector. The purpose of this study is to analyse the economic conditions of Indonesia
through tobacco taxes and tobacco companies, and the evaluation of the health costs incurred in relation to
medical expenses and losses caused by cigarette consumption in the National Health Insurance program.
This study will also seek to provide advice in the form of an alternative. The methodology used in this
research was a literature study. In 2015, based on the data from the Ministry of Financing of the Republic of
Indonesia, cigarettes are the largest contributor of excise revenue at 96 percent. In addition, the results of the
National Health Insurance Performance Accountability Report 2015 shows that health financing issued in
the National Health Insurance program is widely used for catastrophic diseases with the most causes being
due to cigarette consumption. It shows that the income derived from tobacco and cigarette excise and taxes
is not proportional to the losses borne by the National Health Insurance program.
1 INTRODUCTION
Indonesia is one of the largest tobacco-producing
countries with a good level of quality. Therefore,
one of the pillars of the economic condition in
Indonesia comes from tobacco excises and taxes.
High tobacco production results in the high
availability of tobacco. It makes people have to think
about how to process it and what goods can be
produced from agricultural products in the form of
tobacco. The high need and demand for cigarettes
for daily consumption supports the high production
of cigarettes. This is further supported by the idea
that smoking is a part of Indonesian culture.
Until now, cigarettes are one of the best-selling
tobacco products sold in the market. Although
currently, the government has been circulating
cigarette packs with various images that show the
negative impact caused by cigarette consumption.
The demand for cigarettes, despite this, is still high.
Cigarettes indirectly have two levies, namely
tobacco excise and cigarette tax. Increased cigarette
prices will also be one source of income for the
State, one of them by increasing the tobacco excises
and cigarette taxes. The 10% increase in tobacco
excises can reduce cigarette consumption by 1-3%
and increase state revenues by 7-9% (Ahsan, et al,
2012).
The high consumption of cigarettes in
Indonesia sooner or later will have an impact on the
emergence of smoking-related diseases. The health
financing system in Indonesia that started using
National Health Insurance to provide health
insurance for the entire population will certainly feel
the impact as well. The treatment of diseases caused
by cigarettes is not small, nor is it cheap. This is due
to prolonged treatment period. Many diseases have
one of the factors as being smoking. Although
cigarettes are not the only factors in the various
diseases that are responsible for the National Health
Insurance program, cigarettes remain a weighting
factor for many catastrophic diseases which can
exacerbate the burden of health financing for
National Health Insurance.
144
Paramitha, D.
Evaluation of Indonesian Economic Condition Relating to the Excise and Tax from Tobacco and Cigarettes to Health Financing in National Health Insurance Program.
In Proceedings of the 4th Annual Meeting of the Indonesian Health Economics Association (INAHEA 2017), pages 144-147
ISBN: 978-989-758-335-3
Copyright © 2018 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved

2 METHODS
The research method used in this paper was that of a
literature study. The literature study data has been
obtained from Data Riskesdas 2013, Ministry of
Finance Data 2015 and 2016, National Health
Insurance Performance Accountability Report 2015,
and other relevant data. The researchers used a
variety of sources to analyse and compare the state
revenue gains derived from tobacco and cigarettes
excises and taxes (economic sector) with the health
financing for diseases caused by cigarette
consumption (health sector). The results of the
analysis found from the literature study will be
developed for the formulation of alternative
solutions. The formulation of alternative solutions is
based on the results of the problem analysis and
literature studies on similar issues obtained through
journals or articles. The formulation of alternative
solutions has been done by paying attention to
various other factors that allow for different
applications in Indonesia.
3 RESULTS
In 2015, based on the data from the Ministry of
Finance, Republic of Indonesia, cigarettes are the
largest contributor of tobacco excise revenue with a
contribution of 96 percent, with a value of Rp 139.5
trillion out of a total state revenue of Rp 144.6
trillion (Kementerian Keuangan RI, 2015).
However, in 2016, there was a decline in tobacco
excise revenue that made tax revenue in the first
quarter of 2016 down 67 percent from tax revenue in
the first quarter of 2015, equivalent to Rp 7.9 trillion
from Rp 24.1 trillion (Kementerian Keuangan RI,
2016). However, the financing that must be covered
through the National Health Insurance program
related to the impact of cigarette consumption is also
high. The Riskesdas Data of 2013 stated that in the
population aged 15 years and over, 64.9 percent of
men and 2.1 percent of women still smoke cigarettes
in 2013, with the average number of cigarettes
smoked being about 12.3 cigarettes (Badan
Penelitian dan Pengembangan Kesehatan
KEMENKES RI, 2013). In addition, the results of
the National Health Insurance Performance
Accountability Report 2015 showed that health
financing issued in the National Health Insurance
program is widely used for catastrophic diseases
with the most causes being due to cigarette
consumption (Kementerian Keuangan RI, 2016).
Posts related to dilemmas and the economy
because of the high excise and taxes on tobacco and
cigarettes with public health aspects, mainly related
to the financing of health issued by the government,
has been widely studied. However, from some
literature found, there has been no clear formulation
of any solutions and no clear steps to address the
problems. In the United States, for example, efforts
have been made to address the issue of tobacco
problems by increasing tobacco taxes (Bader, P.,
Boisclair, D., & Ferrence, R., 2011). A significant
increase in tobacco tax is a highly effective tobacco
control strategy and leads to significant
improvements in public health (Chaloupka, F. J.,
Yurekli, A., & Fong, G. T., 2012). In addition to
rising cigarette taxes, the United States government
from 1964 to 2014 has been doing a lot of
intervention to change the public image of cigarettes
(Cummings, et al, 2014). US government made
efforts with legislation to smoke in public places,
cigarette counter-marketing campaigns in the mass
media (Cummings, et al, 2014). California and
Ausralia are aggressively implementing anti-
smoking campaigns in the mass media, setting up
anti-smoking school programs, SHS policies, and
youth access relationships to cigarettes (Pierce, et al,
2012).
Tobacco is a supporting commodity of the
Indonesian economy and an asset of the state.
Tobacco can be processed into a product that has a
higher selling value than cigarettes, and has a lower
negative side to health compared with cigarettes. In
several studies conducted on tobacco processing,
one of them showed the result that tobacco can be
used as raw material for making biofuel. Biofuels
are solid, liquid or gaseous fuels that are produced
from biomass (Webb, A. & Coates, D., 2012). The
biomass or organic matter that is converted in to
biofuels may include food crops, dedicated
bioenergy crops, agricultural residues, wood/forestry
waste and by-products, animal manure and algae
(Webb, A. & Coates, D., 2012). The
commercialisation of biofuel production with
tobacco raw materials is considered as a potential for
the long term (Maisashvili, A., L. Bryant, H., & W.
Richardson, J, 2015).
4 DISCUSSION
The various data sets that have been presented in the
previous discussion shows that the economy in
Indonesia is very dependent on the income derived
from the excises and taxes from tobacco and
Evaluation of Indonesian Economic Condition Relating to the Excise and Tax from Tobacco and Cigarettes to Health Financing in National
Health Insurance Program
145

cigarettes. The magnitude of natural products in
Indonesia such as tobacco, with good quality and
relatively cheaper prices, is one of the factors that
make tobacco become the main attraction and one of
the most popular export commodities that
contributes so much revenue to the country.
The condition of people who still lack an
understanding of the diversification of tobacco
processed products, as well as the habit of
processing tobacco into cigarettes that has existed
since ancient times, makes the paradigm of society
about tobacco and cigarettes form in to two
pathways of thought that cannot be fully separated.
The habit of the previous community to smoke has
carried over to the present day. Up until now, in
accordance with the previous discussion, it can be
seen that there are still many Indonesians who
smoke. The age groups range from children to the
elderly who still have a high rate of smokers within
them. It is not surprising if the current trend of
disease in Indonesia. This is supported by an
increasingly unhealthy lifestyle among the
Indonesian population.
Health financing from APBN allocated to
National Health Insurance is still lacking, although
Indonesia has high excises and taxes revenue from
tobacco and cigarettes. The high incidence rate of
catastrophic disease in the Indonesian population,
especially in the population that has been registered
in National Health Insurance, has resulted in
increasing health financing that must be issued by
the government. Catastrophic disease is a high-cost
disease and the complications can be life threatening
(Departemen Kesehatan RI, 2014). Smoking habits
and the accidental inhalation of cigarettes smoke
will increase the risk of catastrophic illnesses such
as hypertension, stroke, coronary heart disease,
diabetes mellitus, and others. At present, the high
amount of health funding in the National Health
Insurance program in the group of catastrophic
illnesses is increasing. The amount of health
financing required is not proportional to the amount
of budget provided for the National Health Insurance
program.
Tobacco is a potential commodity to be used in a
variety of products that can be useful for humans,
compared to just being produced into cigarettes.
Many things can be explored from tobacco, one of
them being biofuel. Biofuel has the potential to serve
as a large-scale industry commodity. In addition, the
selling value of biofuel produced is higher than that
of cigarettes. It is one of the added values that can
replace the mainstream cigarette price commodity of
tobacco. In addition, the number of tobacco farmers
in Indonesia will also be absorbed by the harvest to
become the raw material of this biofuel, if cigarette
production must begin to be reduced. The
application of biofuels en-masse needs to be studied
in more depth for there to be better planning
Steps that can be taken by the government to be
able to overcome the dilemma of the country's
economic resilience and the health effects caused by
cigarettes include:
1. The government may increase tobacco excises
and cigarette taxes in order to reduce cigarette
consumption and increase state revenues,
although the long-term impact of cigarette
consumption in Indonesia will also likely cause
catastrophic diseases caused by cigarettes.
Therefore, the amount of tax and excise needs to
be calculated more thoroughly.
2. The government may allocate funds for health
financing to National Health Insurance,
especially for catastrophic diseases, with a scale
relevant to the expenditure incurred for
catastrophic diseases caused by cigarettes.
3. The government can plan alternative tobacco
processing as one of the mainstay commodities
besides cigarettes. It is expected that this will be
able to reduce the number of cigarettes produced
and still be able to sustain the stability of the
Indonesian economy. If proceeding on
alternative preparations in the form of biofuels,
the government can start to develop biofuels on a
large scale. Biofuel is a non-fossil alternative
fuel, which can be made easily. The idea was
made with the aim to keep room for the
economic sector for tobacco commodities, while
maintaining the stability of the Indonesian
economy but not negatively impacting the health
of the people in Indonesia.
4. The government provides regulations on
smoking restrictions in public places with clear
and firm sanctions.
5. Mobilize anti-smoking campaigns in the mass
media, and provide education on the impacts of
health, social, financial, and productivity aspects.
6. Establish school programs that are anti-smoking
as well as restricting access for young people to
cigarettes.
7. The government may tighten the claims
financing requirements for cigarette-borne
illness. Governments may create regulations that
make people with catastrophic diseases seeking
to make a claim have a medical test first, such as
using pulse oximetry, performed at a prescribed
health facility. The results of these examinations
which will be the determinant of whether or not
INAHEA 2017 - 4th Annual Meeting of the Indonesian Health Economics Association
146

the received claims are submitted. Before that,
the government should also prepare what
facilities are being targeted and the types of
health checks used as well as other technical
preparations. Thus, minimising the gap for
cheating.
5 CONCLUSION
The state revenue derived from the excise and tax of
tobacco and cigarettes is huge, having become one
of the main sources of income for Indonesia.
However, on the other hand, the health financing
that must be issued by the government through the
National Health Insurance program to cover the
health services for diseases caused by cigarette is
very large, especially as most diseases caused by
cigarettes are catastrophic diseases which require
prolonged maintenance and greater costs . It can be
said that the current condition of the Indonesian
economy between the state revenues derived from
the taxes and excise of the tobacco and cigarette
commodities is not comparable with the expenses to
be borne to meet the needs of the state-borne
illnesses by the National Health Insurance program.
The ideas that can be proposed to deal with the
problem contain several points, namely:
1. The government can increase tobacco and
cigarette taxes.
2. The government can allocate benefits from
tobacco and cigarette taxes to NHI.
3. The government can plan an alternative as the
main export commodity, in addition to cigarettes.
4. The government can provides clear rules about
smoking bans in public places.
5. The government can be more intensively anti-
smoking campaign and education through mass
media.
6. The government can creates programs that can
reduce youth access to cigarettes.
7. Governments can implement short-term
strategies by allocating funds for health financing
in the National Health Insurance program,
especially for catastrophic diseases with relevant
quantities.
8. The government can tighten the claims financing
requirements for cigarette-borne illnesses.
REFERENCES
Ahsan, A., Wiyono, N. H., & Aninditya, F. 2012. Laporan
Penelitian: Beban Konsumsi Rokok, Kebijakan Cukai,
dan Pengentasan Kemiskinan.
Lembaga Demografi
Fakultas Ekonomi Universitas Indonesia.
Badan Penelitian dan Pengembangan Kesehatan
KEMENKES RI. Riset Kesehatan Dasar
(RISKESDAS) 2013. Jakarta: Kementerian Kesehatan
RI.
Bader, P., Boisclair, D., & Ferrence, R. 2011. Effects of
Tobacco Taxation and Pricing on Smoking Behavior
in High Risk Populations: A Knowledge Synthesis. Int
J Environ Res Public Health. 2011; 4118–4139.
Chaloupka, F. J., Yurekli, A., & Fong, G. T. 2012.
Tobacco Taxes as a Tobacco Control Strategy.
Tobacco Control Volume 21, Issue 2: 172-180. BMJ
Publishing Group Limited.
Cummings, K. M., & Proctor, R. N. 2014. The Changing
Public Image of Smoking in the United States: 1964–
2014. Cancer Epidemiol Biomarkers Prev. 2014
January ; 23(1): 32–36. doi:10.1158/1055-9965.EPI-
13-0798. NIH Public Access.
Departemen Kesehatan RI. 2014. 52.090 Kebanyakan
Peserta JKN Menderita Penyakit Katastropik.
Kementerian Keuangan RI. 2015. Laporan Akuntabilitas
Kinerja (LAK) 2015. Jakarta: Kementerian Keuangan
RI.
Kementerian Keuangan RI. 2016. Laporan Akuntabilitas
Kinerja (LAK) 2016. Jakarta: Kementerian Keuangan
RI.
Kementerian Keuangan RI. 2016. Laporan Kinerja
Kementerian Keuangan 2016. Jakarta: Kementerian
Keuangan RI.
Maisashvili, A., L. Bryant, H., & W. Richardson, J. 2015.
Economic Feasibility of Tobacco Leaves for Biofuel
Production and High Value Squalene. International
Food and Agribusiness Management Review , Volume
19 Issue.
Pierce, J. P., White, V. M., & Emery, S. L. 2012. What
public health strategies are needed to reduce smoking
initiation?. Tobacco Control Volume 21, Issue 2: 258-
264. BMJ Publishing Group Limited.
Webb, A. & Coates, D. 2012. Biofuels and Biodiversity
Secretariat of the Convention on Biological Diversity.
Montreal, Technical Series No. 65, 69 pages.
Evaluation of Indonesian Economic Condition Relating to the Excise and Tax from Tobacco and Cigarettes to Health Financing in National
Health Insurance Program
147