TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Popular Reads
Top Results
No results found. Please check your search term and try again
Can't find what you're looking for?
View all search results
Popular Reads
Top Results
No results found. Please check your search term and try again
Can't find what you're looking for?
View all search resultsBatam tax status entices cigarette smuggling into Indonesian customs area
Cigarettes produced in the Batam, Bintan and Karimun Free Trade Zone (FTZ) are not required to have a tobacco products excise (CHT) if consumed inside the FTZ, leading to much cheaper cigarette prices when compared to those produced inside the Indonesian customs area.
Change text size
Gift Premium Articles
to Anyone
Share the best of The Jakarta Post with friends, family, or colleagues. As a subscriber, you can gift 3 to 5 articles each month that anyone can read—no subscription needed!
Boxes of illicit cigarettes are stacked in front of a customs patrol boat in an undisclosed location in Batam city, Riau Islands, in this undated picture released by Batam Customs and Excise Office. 11 out of 54 interdictions made in May consisted of cigarettes. (Courtesy of Batam Customs and Excise Office/-)
T
he absence of excise for cigarettes in Batam, Riau Islands, due to its status as a free trade zone (FTZ) has led to high rates of cigarette smuggling through Indonesian customs, especially along the eastern coast of Sumatra.
Batam Customs and Excise Office recorded 11 enforcement documents (SBP) in May, resulting in the confiscation of 1.3 million illegal cigarettes, out of 54 cases of smuggled commodities.
Observers, however, said the number was only the tip of the iceberg for the illegal trade of illicit cigarettes.
Cigarette factories operating in the Batam, Bintan and Karimun (BBK) FTZ do not have to pay tobacco products excise (CHT) and value added tax (VAT) with a condition that the cigarettes are to be distributed and sold inside the FTZ.
“In Central Java and East Java, the state suffers losses of up to Rp 100 billion [US$5.6 million] per year from illicit cigarettes because they do not pay the excise or use counterfeit excise stamps,” economics lecturer at Batam International University, Suyono Saputra, told The Jakarta Post on Wednesday.
“The case is different in Batam because cigarettes sold without a tax inside Batam FTZ are fully legal and valid. However, this regulation loophole is exploited by speculators.”
He said that factories in Batam FTZ produce cigarettes in substantial numbers and then smuggle them out of Batam to chase an extremely high profit margin.
