Macroeconomic impact of tobacco taxation in Indonesia.

BACKGROUND: A significant tobacco tax increase has long been advocated to reduce Indonesia's high smoking prevalence. However, implementing such a policy remains challenging due to the tobacco industry's argument that it would negatively impact the economy. OBJECTIVE: This study aims to provide a comprehensive estimate of the net impact of tobacco taxation on Indonesia's economy. METHOD: The impact of the tax hike on the economy is simulated through a change in cigarette demand and reallocation of household's budget and allocation government spending from additional tobacco tax revenue. Input-output analysis is employed to estimate the net effect of the tobacco tax rise on the total economic output, income and employment in Indonesia. FINDING: Increasing the tobacco tax would generate a net positive impact on the economy as it would increase economic output, household income and employment. The positive impact is mainly driven by government spending from additional revenue from increased tobacco taxes. Spending tax revenue using the current structure of government spending has the potential to generate the optimal economic effect. Increasing tobacco tax by 45% from the 2019 tax level would increase economic output, household income and employment by Rp84.2 trillion, Rp24.1 trillion and 400.3 thousand jobs, respectively.

The 2019 economic cost of smoking-attributable diseases in Indonesia.

BACKGROUND: In 2019, ever-smoking prevalence among adults in Indonesia was 32.8%, which may correlate with a high burden on the economy. Therefore, there is an urgent need to estimate the economic costs of tobacco use, which are crucial for policymakers in planning healthcare provisions and other public expenditures. METHODS: We follow the WHO standard approach, multiplying the sum of the direct and indirect costs with the smoking-attributable fraction. Direct costs include healthcare and non-healthcare costs. Indirect costs include the loss of productivity resulting from absence from work and premature death due to smoking-related illnesses. FINDINGS: We found that the 2019 economic cost of smoking ranges from Rp 184.36 trillion to Rp 410.76 trillion (1.16%-2.59% of the gross domestic product). This research found a similar economic cost of smoking compared with a previous estimate conducted by Kosen et al of Rp 438.5 trillion. However, the estimated direct cost of smoking ranges from Rp 17.9 trillion to Rp 27.7 trillion, which is higher than the estimate of Rp 15.5 trillion by Kosen et al. Badan Penyelenggara Jaminan Sosial Kesehatan allocated between Rp 10.4 trillion and Rp 15.6 trillion to cover the healthcare costs attributable to smoking, representing between 61.2% and 91.8% of the 2019 deficit. CONCLUSIONS: The vast economic cost of smoking is a waste of resources and a burden on Indonesia's National Health Insurance System. Therefore, the government must increase cigarette taxes to correct the negative externalities of smoking consumption.