Received: 2019-11-18  |  Accepted: 2020-07-27  |  Published: 2020-09-30


Tobacco excise tax policy in Indonesia: who does reap the benefits?


In Indonesian tobacco, excise tax policy never decrease every year. As a result, the number of tobacco industries sharply declines, however the prevalence of tobacco smoking steadily increase since 1995. Therefore, this research aims to estimate the increase of tobacco excise tax and its impact on cigarette consumption, government revenue, and the possibility of cigarette sold illegally. There are two analytical model, Logit and Tobit. Logit model is used to estimate the impact of cigarette price towards the probability of household member to smoke or not, and Tobit model is used to estimate the impact of price change towards the amount of cigarette consumption. Tobit model is employed since it include non-smoker household, covering 40% of total household. The estimation is based on SUSENAS published on March 2017. The result suggests increasing cigarette prices does not lessen people desire to be smokers; indicating that most Indonesian consider cigarette as basic needs. Consequently, the increase of tobacco excise tax leads to the growth of government revenue and number of illegally sold cigarette. Therefore, it conclude that large-scale industries benefit the most, when this result is linked to the decrease of tobacco industries data. Meanwhile, Indonesian people may get the benefit, if the government revenue is appropriately allocated to stimulate economic and development.


tobacco excise, tax policy, prevalence of tobacco smoking, Logit, Tobit

JEL classifications

D10 , D40 , H20 , L10 , L20






This is an open access issue and all published articles are licensed under a
Creative Commons Attribution 4.0 International License


Santoso, Dwi Budi
University of Brawijaya, Malang, Indonesia
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Erlando, Angga
Airlangga University, Surabaya, Indonesia
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Journal title

Entrepreneurship and Sustainability Issues





Issue date

September 2020

Issue DOI


ISSN 2345-0282 (online)


VšĮ Entrepreneurship and Sustainability Center, Vilnius, Lithuania


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