Jokowi signs presidential regulation that will use cigarette taxes to cover national health insurance deficit

Photo: Rokok Indonesia / Flickr (CC BY 2.0)
Photo: Rokok Indonesia / Flickr (CC BY 2.0)

Indonesia’s ambitious national health insurance program (JKN), launched by President Joko Widodo in 2015, has had some great success in expanding healthcare coverage and accessibility throughout the country, but it is also mired with enormous deficits. One of the biggest strains on the system is the country’s notoriously high smoking rates and thus the large number of Indonesians suffering from tobacco-related diseases (which claim over 200,000 lives here per year).

But a new presidential regulation (Perpres) signed by Jokowi could help fix the deficit by funneling some of the enormous amount of state revenue from cigarette taxes directly into JKN.

Deputy Minister of Finance Mardiasmo explained the new Perpres at a joint meeting of Commission IX in the House of Representatives (DPR) yesterday. He explained that the regulation, signed into law by the president last week, will require a minimum of 50 percent of cigarette tax revenue collected by local governments to be allocated to JKN.

“With this Perpres, all provinces and cities can use their cigarette taxes (to fund JKN). Up to 75 percent will taken from them,” Mardiamo said yesterday as quoted by CNN Indonesia.

The government has estimated that this year’s cigarette tax revenue would be around IDR 13 trillion (US$871 million). So he said they could expect around IDR 6.5 trillion of that to be used for the national health care scheme.

That still wouldn’t be enough to cover the scheme’s total deficit, which the Finance and Development Supervisory Agency (BPKP) estimated to be just under IDR 11 trillion by the end of this year. But the Ministry of Finance said it was ready to disburse IDR 4.993 trillion in reserve funds at the president’s direction to cover the remaining deficit from reserve by next week at the latest. It has also promised moves to increase the fiscal efficiency of JKN in future years.

 



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