Profesor Muhammad Handry Imansyah presented a paper with titled: The Potential Impact Analysis of the Increase Tobacco Excise Tax in Indonesia: Input-Output Simulation at Annual Economics Meeting and Workshop on Tobacco Taxation Da Lat, Vietnam, in 18 – 21 Juni 2019. The objective of this paper is to simulate potential impact the increase of tobacco excise tax resulting change of consumption pattern.
The measurement of potential impact on the economy due to the increase of tobacco excise tax resulting the increase of cigarette to the consumers will influence the whole economy. This option must consider the following aspects. Firstly, the price elasticity of demand for cigarettes. Secondly, the tools of analysis to measure the impact. One of the powerful tools is input-output analysis to measure the impact.
The simulation of this paper is based on the model simulation concept developed by Ahsan & Wiyono (2007). They simulate using Input-output Table to examine the impact of the tax increase will yield a higher cigarette price. This condition will affect the decline of demand consumption of cigarette. In the same time, there is a change of consumption pattern. This idea was also used by Merwe & Abedian (1999) who simulate a reduction in consumer expenditure on cigarettes and its effects on employment in South Africa.
The results suggest that overall net impact the increase of tobacco excise tax provides positive impact on the economy. The high price elasticity of demand, it provides a more substantial impact to the economy. In the long run, it is important to note that the more developed of a country, price elasticity of demand appears to be more elastic. Therefore, policy options to reduce cigarette becomes easier using price intervention by increasing tobacco excise tax.