Issue link: http://read.dmtmag.com/i/566084
36 tobaccoasia / Issue 4, 2015 (September/October) Mark Your Calendar For more Information on this NEW Show dedicated to Tobacco Machinery used in the Production, Processing and Packaging of Tobacco Products Call Reuter Exposition Services, LLC at (203) 483-5774 or email: info@reuterexpo.com Tobacco taxes have been raised, on aver- age, 11% annually since 2010. The Indonesian government set ambitious tax collection targets for this year, including one of IDR139 trillion for cigarette taxes. Now, with the economic downturn, the government removed luxury taxes from most goods, raised the minimum taxable income threshold for individuals, and promised no new types of taxes this year in hopes to encourage public consumption. Earlier this year the Indonesian govern- ment announced plans for an additional 10% value added tax (VAT) on cigarette sales, but it has yet to be imposed. Right now the gov- ernment is undecided on what to do with the cigarette tax for 2016, leaving those in the local tobacco industry on the edge of their seats with trepidation. International Challenges While at home the current and future situa- tions for SKMs looks bright, despite tax hikes, higher prices, and lower consumer spending power, in the international markets kretek face major challenges due to restrictions in the EU and the US. In Europe, the new EU Tobacco Products Directive, which came into force in May, includes a ban on flavored cig- arettes, which would include kretek. Member states have two years to introduce the leg- islation. Across the pond, the US banned clove cigarettes under US Food & Drug Ad- ministration's (FDA) ruling in 2009, as part of the Fam- ily Smoking Prevention and Tobacco Control Act. Those who oppose this ban believe it is incorrect to include clove sticks under the US ban on fla- vored tobacco, the main argu- ment being that kretek are not flavored cigarettes, as, unlike menthol cigarettes or fruit- flavored or chocolate-flavored cigarettes, kretek are basically tobacco and natural cloves, not clove flavoring. An Indonesian appeal to WTO claimed that, "the bur- den of that measure fell almost entirely on Indonesia." WTO agreed that FDA's measure was unfair, based on the fact the US still allows the sale of menthol cigarettes. In a 2013 ruling WTO stated the ban was inconsistent with the "technical barriers" to trade agreement "because it accords clove cigarettes less favor- able treatment than that ac- corded to menthol-flavored cigarettes" and decided that clove- and menthol-flavored cigarettes are "like products". However, despite the WTO ruling, clove cigarettes remain barred from sale in the US. WTO is now arbitrating on Indonesia's request to sus- pend import licensing obliga- tions and tariff concessions that it provides to the US un- der the General Agreement on Tariffs and Trade 1994. FDA has also been revisiting its po- sition on menthol cigarettes. It looks like there is some hope for kretek cigarettes in these international markets still.