The draft Government Regulation (RPP) as the implementation of Law Number 17 of 2023 on Health has raised concerns among electronic cigarette or vape industry players. This RPP has led foreign investors to withhold their investments in Indonesia.
Garindra Kartasasmita, the Secretary-General of the Indonesian Personal Vaporizer Association (APVI), mentioned that since the draft RPP was uploaded on the Ministry of Health’s website, it reached foreign electronic cigarette entrepreneurs. Consequently, they have decided to withhold investments in Indonesia.
“When this RPP draft was available for download on the Ministry of Health’s website, the draft reached foreign electronic cigarette entrepreneurs, causing them to withhold investments in the country,” he said, on December 20, 2023.
He stated that the RPP has made industry players afraid to open branches, and foreign investors are hesitant to establish stores in Indonesia.
“This has already happened even though it has not been enacted yet, but it has had an impact,” he added.
He argued that there are inaccuracies in the drafting of the RPP. From a technical standpoint, he mentioned that business players, as balancers, were not given enough time for discussions.
“In the formulation of this RPP, we see that the balancing side was not given enough time and space for discussions, very minimal indeed,” he noted.
On the other hand, electronic cigarette industry players also objected to the planned imposition of taxes on electronic cigarettes starting in 2024.
As most vape entrepreneurs are micro, small, and medium-sized enterprises (MSMEs), the imposition of electronic cigarette taxes will undoubtedly burden business players due to the added cost.
Eko Priyo HC, the Chief Marketing Officer of PT Indo Emkay Abadi (Emkay), expressed his concern about the impact of imposing taxes on electronic cigarettes in 2024. This will add a 10% tax on top of the applicable excise tax.
“We strongly object to the imposition of taxes on electronic cigarettes in 2024, resulting in an additional 10% tax on top of the applicable excise tax,” said Eko in his statement.
He added that the electronic cigarette industry is already under pressure with the excise tax increases in 2023 and 2024. Additionally, consumer purchasing power remains low after being hit by the pandemic. “Once again, the spirit of the vape industry in Indonesia is as a better alternative product for tobacco consumers,” he stated.
As information, the Ministry of Finance through PMK No. 192/2022 has set a 15% excise tax increase for the electronic cigarette (REL) segment for 2023 and 2024.
Currently, there is a discussion about imposing a 10% tax on electronic cigarettes based on the applicable excise tax. Eko also regretted that the government did not engage in discussions with business players regarding this matter.
“There was a one-way information dissemination, as if informing the tax imposition mechanism. We feel this is not the right discussion space. The space to accommodate our objections also turned out to be not ideally considered in the decision-making process of the Ministry of Finance,” he complained.
