EXCISE TAX LAW: INDONESIA AND NIGERIA AS CASE STUDIES; A Comparative Legal Analysis of Excise Tax Frameworks, Rate Structures, Public Health Objectives, and Enforcement Mechanisms

ABSTRACT

This paper presents a comparative legal analysis of excise tax law in the Republic of Indonesia and the Federal Republic of Nigeria. Excise taxation is a distinct category of indirect tax imposed on specific goods, principally tobacco products, alcoholic beverages, and sugar-sweetened beverages, whose consumption generates negative externalities warranting both fiscal extraction and regulatory control.¹ The paper examines the statutory foundations, categories of excisable goods, rate structures, administrative machinery, earmarking arrangements, public health rationale, and key enforcement challenges in each jurisdiction, with particular attention to each country’s compliance with the World Health Organization Framework Convention on Tobacco Control (WHO FCTC).² It finds that Indonesia’s tiered multi-product excise system (cukai) is institutionally more mature. In contrast, Nigeria’s framework, despite the landmark Nigeria Tax Act 2025, suffers from policy inconsistency, rate inadequacy relative to international benchmarks, and enforcement fragility. The paper concludes with comparative recommendations aligned with the WHO FCTC Article 6 guidelines and ECOWAS regional standards.

Keywords: Excise Tax, Cukai, Indonesia, Nigeria, Tobacco Tax, Alcohol Excise, Sugar-Sweetened Beverages, WHO FCTC, Illicit Trade, Nigeria Tax Act 2025, Bea Cukai.

1. INTRODUCTION

Excise taxation occupies a unique position in any country’s fiscal architecture. Unlike general taxes on income or consumption, excise duties are narrowly targeted at specific goods sharing three defining characteristics: their consumption can be controlled and quantified; they often carry negative externalities for public health or the environment; and they justify a fiscal rationale rooted in both revenue generation and behaviour modification.³ The theoretical underpinning of this dual purpose derives from Pigouvian welfare economics: where consumption of a good generates negative externalities, a corrective tax equal to the marginal external cost internalises those externalities and moves consumption toward the socially optimal level.⁴

Indonesia and Nigeria present a particularly instructive comparative pairing. Both are among the most populous nations in their respective regions; both host large domestic tobacco and alcohol industries; and both are implementing significant excise reform in the 2020s. Yet their approaches diverge sharply: Indonesia has built, over more than three decades, a sophisticated tiered excise structure for tobacco products (cukai hasil tembakau, CHT) administered by a specialised authority (Bea Cukai), whereas Nigeria’s excise regime, historically fragmented and subject to policy reversals, has only recently been modernised through the Nigeria Tax Act 2025 (NTA) and the 2026 Fiscal Policy Measures and Tariff Amendments.⁵

This paper proceeds as follows: Section 2 establishes the theoretical and comparative framework for excise taxation. Section 3 provides an in-depth analysis of Indonesia’s excise legal framework. Section 4 examines Nigeria’s framework. Section 5 presents a structured comparative analysis supported by tables. Section 6 addresses critical issues, including illicit trade, electronic cigarettes, and WHO FCTC compliance.⁶ Section 7 provides recommendations, and Section 8 concludes.

2. EXCISE TAX: DEFINITION, THEORY, AND COMPARATIVE FRAMEWORK

2.1. Defining Excise Tax

Excise duties are indirect taxes levied on specific categories of goods at the point of manufacture or importation, distinguishing them from VAT, which applies broadly at each stage of the supply chain, and from customs duties, which apply exclusively at the border to imported goods. Excise may be levied as specific (per-unit) charges imposing a fixed monetary amount per quantity, or as ad valorem charges imposing a percentage on product value. Hybrid systems combining both are common and employed by both Indonesia and Nigeria.⁷

Contemporary excise policy serves at least three functions simultaneously: revenue mobilisation, behaviour modification, and market regulation.⁸ The relative weight assigned to each function differs significantly between Indonesia and Nigeria, as will be demonstrated. In Indonesia, the four statutory criteria for excisable goods—consumption control, circulation supervision, negative impact prevention, and fiscal justice—explicitly encode all three functions.⁹ In Nigeria, by contrast, the pre-2025 legal framework provided no comparable principled gateway, with excise categories determined by Finance Act amendments on an ad hoc annual basis.¹⁰

2.2. The WHO FCTC Standard

The World Health Organization Framework Convention on Tobacco Control, adopted in 2003, establishes the leading international standard for tobacco tax policy.¹¹ Article 6 of the FCTC obliges State Parties to implement tax and price policies on tobacco that reduce consumption.¹² WHO guidelines recommend that tobacco excise taxes constitute at least 70% of the retail price of cigarettes.¹³ Both Indonesia and Nigeria fall significantly short of this benchmark. Nigeria, as a State Party since 2005, bears binding obligations under Article 6; Indonesia, as a signatory but non-party, bears the lesser obligation under the Vienna Convention on the Law of Treaties to refrain from acts defeating the treaty’s object and purpose.¹⁴

2.3. Comparative Methodology

The methodology employed in this paper is functionalist in orientation: rather than juxtaposing legislative texts in isolation, the analysis asks what social, economic, and public health purposes each excise provision is designed to serve, and whether the legal instruments deployed effectively achieve those purposes.¹⁵ This approach is complemented by doctrinal legal analysis of primary legislation and by reference to empirical data on excise revenue performance, illicit trade rates, and WHO compliance benchmarks.

3. EXCISE TAX LAW IN INDONESIA

3.1. Constitutional and Statutory Foundation

Indonesia’s excise law (cukai) traces its institutional lineage to the Dutch colonial Tabaksaccijns Ordonnantie (Staatsblad 1932 No. 517), which established the forerunner of today’s Directorate General of Customs and Excise (DJBC). The post-independence framework is anchored in Law No. 11 of 1995 concerning Excise (Undang-Undang Cukai)¹⁶ as substantially amended by Law No. 39 of 2007.¹⁷ The 2007 amendment significantly broadened the definition of excisable goods and strengthened enforcement mechanisms, introducing the four-criterion test for excisability that remains in force.

The most recent statutory reform is Law No. 7 of 2021 on Tax Harmonisation (HPP Law), Article 4(2) of which expressly authorises the addition of new excise-taxable goods to be stipulated in successive Annual State Budget Laws (RAPBN).¹⁸ This provision has been invoked to include packaged sweetened beverages (minuman berpemanis dalam kemasan / MBDK) and plastic products as prospective excisable categories, though implementation of the MBDK excise has been repeatedly delayed.¹⁹

3.2. Criteria for Excisable Goods

Article 2 of Law No. 39/2007 provides that goods may be designated excisable if they satisfy one or more of four cumulative criteria: (i) their consumption needs to be controlled; (ii) their circulation needs to be supervised; (iii) their use may have a negative impact on society or the environment; and/or (iv) the state levy is necessary for reasons of justice and balance.²⁰ This four-criterion test is the principled legal gateway through which new goods, including sweetened beverages, plastics, and potentially carbon-intensive products, may enter the excise net. It represents a significant structural advantage over Nigeria’s pre-2025 ad hoc category-by-category Finance Act approach.

3.3. Tobacco Excise: The Multi-Tier CHT System

Indonesia’s tobacco excise regime is one of the most complex in the world, structured around a tiered system (tarif berjenjang) classifying tobacco products by type, manufacturing method, and production volume. Major categories include Machine-Rolled Clove Cigarettes (SKM), Machine-Rolled White Cigarettes (SPM), Hand-Rolled Cigarettes (SKT/SPT), and Other Processed Tobacco Products (HPTL), including electronic cigarettes and heated tobacco products.²¹ Within each category, manufacturers are allocated to tiers (Groups I, II or III) based on annual production volume, with higher-volume producers attracting higher specific excise rates per stick.

The government implemented an average 10% excise rate increase across categories in 2024, pursuant to Ministry of Finance Regulation No. 191/PMK.010/2022.²² However, no rate increase was announced for 2025, reflecting a deliberate policy pivot from rate escalation to consolidation, prioritising enforcement against illicit trade and improvement of compliance infrastructure over further upward rate pressure.²³ A critical feature of the rate system is the Minimum Retail Selling Price (Harga Jual Eceran / HJE), set by the government for each product category and tier, establishing a price floor below which cigarettes cannot legally be sold.²⁴

3.4. Cigarette Tax (Pajak Rokok): The Regional Dimension

A legally distinctive feature of Indonesia’s tobacco fiscal system is the Pajak Rokok (cigarette tax), a levy imposed at 10% of the cigarette excise amount, collected simultaneously with excise by the DJBC.²⁵ Proceeds are constitutionally transferred to provincial governments (80%) and municipalities (20%). Its dual purpose is to compensate sub-national governments for the public health costs of cigarette consumption and to generate local revenue for health service funding.²⁶ This regional dimension has no direct equivalent in Nigeria’s centralised excise framework.

3.5. Revenue Earmarking: The DBH CHT Mechanism

Among the most legally significant features of Indonesia’s tobacco excise system is the Dana Bagi Hasil Cukai Hasil Tembakau (DBH CHT) revenue-sharing mechanism, under which 57% of total national tobacco excise revenue is distributed to tobacco-producing provinces, mandated for specific purposes: improving farmer welfare, funding health services, and financing excise enforcement.²⁷ This earmarking mechanism creates a legislated feedback loop between tobacco excise revenue and the social costs of tobacco production and consumption, a principle of fiscal hypothecation that the legal framework institutionalises through successive annual Budget execution regulations.

3.6. Alcohol Excise: The MMEA and ABV Differentiation

Alcoholic beverage excise in Indonesia is levied per litre at rates differentiated by alcohol content group: Group A beverages (≤5% ABV) at IDR 16,500/litre; Group B (5–20% ABV) at IDR 42,500/litre; and Group C (>20% ABV) at higher rates. Imported alcoholic beverages of any alcohol content are subject to a base rate of IDR 20,000/litre.²⁸ Excise rates were frozen for 2025 following a 10% average increase in 2024, with projected alcohol excise revenue of approximately IDR 9.6 trillion.

3.7. Administration and Enforcement

The DJBC (Bea Cukai) administers excise through registration of manufacturers, issuance of excise banderol (revenue stamps affixed to each pack or bottle), facility inspection, and enforcement against illicit products.²⁹ The banderol system is the cornerstone of Indonesia’s excise control: counterfeit or absent stamps are the primary indicator of illicit products. Despite this mechanism, illicit cigarette prevalence rose from 4.9% in 2020 to 6.9% of the market in 2023,³⁰ generating estimated revenue losses of IDR 24.2–42.0 trillion in 2018 alone.³¹ The persistence of illicit trade in the face of a mature stamp system reflects the structural problem of tiered rate gaps: the wide price differential between Group I and Group II/III cigarettes creates arbitrage opportunities exploited by illicit producers.³²

Tobacco excise (CHT) generated IDR 121.9 trillion in revenue in 2024, a 9.6% year-on-year growth,³³ confirming the excise system’s fiscal significance even as enforcement challenges persist.

4. EXCISE TAX LAW IN NIGERIA

4.1. Historical and Constitutional Foundation

Nigeria’s excise duty regime traces its origins to the Customs and Excise Management Act (CEMA) of 1990, which consolidated colonial-era customs and excise legislation. Parts V and VI of the CEMA govern excise duties on goods manufactured within Nigeria, administered through the Nigeria Customs Service (NCS). Unlike Indonesia’s self-contained excise law, Nigeria historically subsumed excise within its broader customs management framework, a structural choice that has produced a less conceptually developed excise jurisprudence and greater vulnerability to ad hoc legislative intervention.

The Finance Acts enacted between 2019 and 2023 introduced several significant excise amendments: most notably, the Finance Act 2021, which reintroduced a NGN 10 per litre excise on sugar-sweetened non-alcoholic beverages,³⁴ and the Finance Act 2022, which substantially increased tobacco and alcohol excise rates.³⁵ However, a July 2023 Executive Order reversed the 2022 tobacco and alcohol rate increases, reportedly to “relieve local manufacturers and stimulate local production,”³⁶ a policy reversal widely criticised by public health advocates and FCTC monitoring bodies.³⁷

4.2. The Nigeria Tax Act 2025 and Excise Modernisation

The Nigeria Tax Act 2025 (NTA), signed on 26 June 2025 and effective from 1 January 2026, is the most comprehensive codification of Nigerian tax law since independence.³⁸ For excise duty, the NTA and the 2026 Fiscal Policy Measures and Tariff Amendments introduce a modernised framework with several innovations:

• Harmonisation of the tariff regime with ECOWAS Common External Tariff (CET) standards, reducing the number of tariff bands and improving predictability;
• Mandatory electronic payment of all excise duties through authorised platforms linked to the Single Tax Account system, creating an auditable transaction trail accessible to the NCS and NRS;
• Mandatory e-invoicing for all excise payers, integrated with NRS digital compliance infrastructure;
• Extension of excise to new categories: a 5% excise duty on telecom services (mobile calls, SMS, data) reinstated under the NTA 2025; a Green Tax Surcharge on motor vehicles; and continuation of the NGN 10/litre SSB excise.

4.3. Tobacco Excise: The 2026 Rate Schedule

The 2026 Fiscal Policy Measures and Tariff Amendments introduce a three-year phased excise schedule for tobacco products, effective 1 July 2026.³⁹ For cigarettes, the regime combines a 30% ad valorem rate with a specific rate of NGN 6.00 per stick (NGN 120 per pack of 20 sticks) in 2026, rising to NGN 7.00 per stick (NGN 140 per pack) in 2027, and NGN 8.00 per stick (NGN 160 per pack) in 2028.⁴⁰ Other tobacco products, including homogenised tobacco, chewing tobacco, and snuff, attract NGN 4,500/kg or NGN 6,000/litre from 1 July 2026.⁴¹

Public health advocacy bodies have criticised this schedule as inadequate. CISLAC and the Tax Justice Network Africa (TJNA) observe that the annual increment of NGN 1.00 per stick fails to outpace inflation, making tobacco increasingly affordable in real terms.⁴² Under the previous 2024 regime, a cigarette stick attracted a specific excise of NGN 5.20; the 2026–2028 increments fall far short of the WHO FCTC Article 6 benchmark requiring excise to constitute at least 70% of the retail price,⁴³ and do not meet the ECOWAS Directive minimum benchmark for member states.⁴⁴

4.4. Alcohol Excise: Flat-Rate Structure

The 2026 Fiscal Policy Measures establish a phased specific rate schedule for alcoholic beverages effective 1 July 2026: beer and stout at NGN 72/litre in 2026, rising to NGN 76 in 2027 and NGN 80 in 2028.⁴⁵ Wines face a hybrid regime: 25% ad valorem plus NGN 70/litre from 2026. Spirits face the highest combined burden: 30% ad valorem plus NGN 75/litre in 2026, rising to NGN 80 in 2027 and NGN 85 in 2028.⁴⁶

Critically, Nigeria’s alcohol excise does not differentiate rates by alcohol by volume (ABV), unlike Indonesia’s Group A/B/C graduated system.⁴⁷ This means a low-alcohol beer and a high-ABV malt beverage face the same per-litre specific rate, a design feature that reduces the public-health progressivity of the regime and may not effectively target the consumption of highest-harm products.⁴⁸

4.5. Sugar-Sweetened Beverages and Telecom Excise

Nigeria’s NGN 10 per litre excise on non-alcoholic carbonated and sweetened beverages, including fruit juices and energy drinks, has been in operation since 2021 and is confirmed under the NTA 2025.⁴⁹ International evidence strongly supports SSB excise as a cost-effective public health intervention: a landmark study of Mexico’s SSB excise demonstrated a 7.3% reduction in sugary drink purchases in the first year, with greater reductions among low-income households.⁵⁰ Indonesia, despite government announcements of the MBDK excise in successive budget proposals, has repeatedly delayed implementation under industry pressure.

The NTA 2025 also reinstates a 5% excise duty on telecom services, first introduced under the Finance Act 2020 but subsequently suspended, generating concerns about digital inclusion in a country where mobile data costs are already a significant barrier for low-income users.⁵¹ Indonesia does not impose excise on telecommunications services, reflecting a deliberate policy choice to avoid excise-related cost escalation in the digital economy.

4.6. Enforcement and Institutional Challenges

Nigeria’s enforcement challenge is acute. Under-declaration of production volumes by manufacturers, particularly of tobacco, alcohol, and SSBs, is a systemic problem documented in academic literature and government reports.⁵² The NTA 2025 addresses this through mandatory e-invoicing and the Electronic Fiscal System (EFS), but these tools require both institutional capacity and industry cooperation. Policy reversals, such as the 2023 rollback of 2022 rate increases, further undermine enforcement credibility, signalling to manufacturers that lobbying can be more effective than compliance. Tobacco industry influence has been documented by scholars as a persistent structural barrier to FCTC-aligned excise reform in Nigeria.

5. COMPARATIVE ANALYSIS

5.1. Comparative Overview Table

5.2. Tobacco Excise Rate Comparison

5.3. Alcohol Excise Rate Comparison

5.4. Legal Architecture: Gateway Criteria vs. Ad Hoc Categorisation

A foundational comparative observation concerns the legal methodology each jurisdiction uses to identify excisable goods. Indonesia’s Article 2 four-criterion test provides principled legal grounds for expanding the excise base without requiring new legislation for each category, a structural flexibility that has been invoked for MBDK and plastics, however delayed their implementation. Nigeria’s pre-NTA 2025 framework relied on Finance Act amendments, creating a year-by-year, case-by-case approach that produced fragmentation and reversibility. The NTA 2025 brings greater statutory unity, but it still does not articulate criteria for excisability comparable to Indonesia’s Article 2 gateway, leaving future category expansion without principled legislative guidance.

5.5. Rate Design: Specific, Ad Valorem, and Hybrid Structures

Indonesia relies primarily on specific per-stick excise rates for tobacco, which offer predictability and resist undervaluation. The tiered rate structure adds complexity but serves small-manufacturer protection objectives and accommodates the cultural specificity of hand-rolled clove cigarettes in the Indonesian market. Nigeria’s revised tobacco regime combines ad valorem and specific elements, technically superior to a pure ad valorem approach in protecting against inflation erosion, but the absence of a minimum retail price floor (unlike Indonesia’s HJE system) means specific rates can be partially absorbed by manufacturer price reductions, limiting consumer price impact.

For alcohol, Indonesia’s ABV-graduated specific rate design is more public-health-aligned than Nigeria’s flat per-litre structure. In Indonesia, higher-alcohol products face proportionately greater duty burdens, consistent with the principle that higher-ABV products carry higher harm profiles. Nigeria’s uniform NGN 72/litre beer rate, applying equally to 2% and 5% ABV products, does not reflect this principle.

5.6. Earmarking and Revenue Hypothecation

One of the most legally distinctive features of Indonesia’s excise regime is the DBH CHT earmarking mechanism directing 57% of tobacco excise revenue to producing regions for health, farmer welfare, and enforcement purposes. This creates a legislated feedback loop between excise revenue and the social costs of tobacco consumption. Nigeria has no comparable earmarking mechanism; proceeds enter the general consolidated revenue fund. The World Bank’s USD 750 million Accelerating Resource Mobilisation Reforms loan has explicitly conditioned disbursements on Nigeria enacting legislative orders to reform pro-health taxes, a condition involving, inter alia, the use of excise revenue for health funding, that remained unmet as of May 2025.

5.7. WHO FCTC Compliance: A Comparative Assessment

Both countries fall significantly short of the WHO 70% retail price benchmark for tobacco excise. Nigeria, as a State Party bearing binding Article 6 obligations, faces more immediate legal exposure. TJNA and CISLAC have documented that the 2026–2028 rate schedule, anchored at NGN 6.00/stick in 2026, does not satisfy Article 6 obligations, fails to meet the ECOWAS Directive benchmark, and makes tobacco increasingly affordable in real terms. Indonesia, while not formally bound as a non-party, similarly falls short: tobacco excise as a share of retail price remains below 70% for most categories, and the persistent downtrading phenomenon reflects the structural inadequacy of a tiered rate system whose inter-tier price gaps incentivise substitution to cheaper, and less-taxed, products.

6. CRITICAL AND EMERGING ISSUES

6.1. Electronic Cigarettes and Heated Tobacco Products

Electronic cigarettes and heated tobacco products (HTPs) are among the fastest-growing segments of the global tobacco market, presenting a regulatory challenge for both jurisdictions. Indonesia classifies electronic cigarettes and HTPs within the HPTL (Other Processed Tobacco Products) category, taxed at ad valorem rates, a legal basis that exists but has been criticised for its low effective rate relative to conventional cigarettes, potentially generating regulatory arbitrage incentives. Nigeria’s NTA 2025 includes electronic cigarettes within its broader tobacco definitions, but has not published separate specific excise rates. The absence of a clear rate and enforcement mechanism for vaping products, widely sold through informal channels in urban Nigeria, is a significant legal and fiscal gap. Both countries would benefit from WHO guidance on HTP taxation, which recommends applying rates comparable to conventional cigarettes.

6.2. Sugar-Sweetened Beverages: Delayed vs. Implemented

The contrast between Indonesia and Nigeria on SSB excise is instructive. Nigeria implemented its NGN 10/litre SSB excise in 2021 and has maintained it through the NTA 2025, accumulating implementation experience despite sustained industry pressure. Indonesia, despite successive budget law inclusions, has repeatedly delayed implementation of the MBDK excise, citing concerns about economic conditions, industry impact, and employment effects. International evidence strongly supports SSB excise as a cost-effective public health intervention, making Indonesia’s delay both a missed health policy opportunity and a foregone revenue stream, with the irony that the formally less advanced Nigeria has in this respect adopted a more WHO-aligned posture than Indonesia.

6.3. Illicit Trade: A Structural Comparative Challenge

Both countries face structurally similar illicit trade challenges, driven by price differentials between legally taxed products and illicit untaxed substitutes. Indonesia’s banderol system, despite its institutional maturity, has not prevented illicit cigarette prevalence reaching 6.9% of the market, the structural cause being the tiered rate gap between Group I and Group II/III products, which creates downtrading incentives exploited by illicit producers. Nigeria’s enforcement challenge is compounded by institutional fragility and policy inconsistency: where manufacturers can successfully lobby for rate reversals, the incentive to invest in compliance infrastructure is weakened.

The World Bank has flagged enforcement capacity as a precondition for effective excise revenue mobilisation in Nigeria, while academic literature identifies the tobacco industry’s deliberate engagement in regulatory processes as a key barrier to effective excise enforcement. Both findings suggest that the legal reform challenge in excise taxation is inseparable from institutional and political economy challenges that go beyond the design of the legislation itself.

6.4. The Telecom Excise: A Divergence in Digital Taxation Philosophy

Nigeria’s decision to impose a 5% excise duty on telecom services under the NTA 2025 marks a significant and contested divergence from Indonesia’s approach. Indonesia deliberately excludes telecom services from excise, prioritising digital economy development without excise-related cost escalation. Nigeria’s telecom excise, while revenue-positive in the short term, risks undermining digital inclusion in a country where data costs already constitute a substantial affordability barrier, particularly for low-income users who depend on mobile connectivity for livelihoods and financial services. From a comparative tax law perspective, the choice between digital inclusion and excise revenue from telecom services is a genuine policy trade-off with no settled international consensus.

7. RECOMMENDATIONS

7.1. For Indonesia

Simplify the multi-tiered tobacco excise structure progressively toward a two-tier or single-tier specific rate system, phased across the 2025–2029 National Medium-Term Development Plan period, reducing the inter-tier price gaps that drive downtrading and illicit trade. Transitional protections for small-scale hand-rolled (SKT) manufacturers should be addressed through targeted industrial adjustment support, not permanent rate discounts.

Expedite implementation of the MBDK (sweetened beverage) excise at a rate reflecting international evidence on consumption elasticity, ideally equivalent to at least 20% of the retail price or a specific rate of IDR 1,500–2,500 per litre. The repeated delay enables continued consumption of products with documented public health costs and foregoes significant fiscal revenue.

Consider ratifying the WHO FCTC to assume formal Article 6 obligations, and establish a trajectory for aligning tobacco excise rates with the 70% retail price benchmark over a five-to-ten-year horizon.

Transition from physical banderol (excise stamps) to serialised digital track-and-trace markers, enabling real-time supply chain monitoring from factory to retail outlet and reducing counterfeit banderol incidence.

7.2. For Nigeria

Reform the tobacco excise rate schedule to adopt a strong, uniform specific rate moving toward the ECOWAS Directive benchmark combined with an automatic annual indexation mechanism tied to inflation or income growth. The current NGN 1.00/stick annual increment is economically trivial and does not satisfy Nigeria’s WHO FCTC Article 6 obligations.

Introduce a Minimum Retail Price (MRP) mechanism for cigarettes, analogous to Indonesia’s HJE system, to prevent manufacturers from absorbing excise increases through retail price reductions and thereby ensuring that duty hikes translate into consumer price increases that reduce affordability.

Enact a legislative earmarking provision linking a defined percentage of tobacco and alcohol excise revenue to health system expenditure, particularly the Basic Healthcare Provision Fund, creating an institutionalised funding link between the social costs of harmful consumption and health investment, and satisfying the World Bank’s development loan conditionality on pro-health tax earmarking.

Insulate the excise rate schedule from executive order reversal by embedding future rate adjustments in the NTA itself or mandating parliamentary approval for any downward revision, addressing the credibility deficit caused by the 2023 rate reversal.

7.3. For Both Jurisdictions

Establish a formal bilateral technical cooperation arrangement between Indonesia’s DJBC (Bea Cukai) and Nigeria’s NCS to share experience in excise stamp design, digital enforcement technologies, and illicit trade investigation; both countries face structurally similar illicit trade challenges that would benefit from peer learning.

Jointly advocate within the WHO FCTC Conference of the Parties and the relevant ECOWAS health and finance forums for development of excise tax standards specifically tailored to developing-country fiscal and institutional contexts, recognising that both the WHO 70% benchmark and OECD excise methodologies were largely designed around high-income country tobacco markets.

8. CONCLUSION

This paper has presented a detailed comparative legal analysis of excise tax law in Indonesia and Nigeria. The analysis reveals both significant structural commonalities and important divergences that carry lessons for policymakers, legal scholars, and public health advocates in both countries.

The commonalities are structural: both countries grapple with large informal markets, significant illicit trade in tobacco products, excise rates that fall short of the WHO FCTC Article 6 benchmark, and the ongoing challenge of building effective digital enforcement infrastructure. Both have also embarked on meaningful excise modernisation: Indonesia through its 2025 consolidation strategy and the long-anticipated MBDK excise; Nigeria through the landmark NTA 2025 and the 2026 phased rate schedule.

The differences are equally instructive. Indonesia’s cukai framework is institutionally mature, legally self-contained, and produces a sophisticated multi-tier system that, for all its complexity, has delivered consistent and growing tobacco excise revenue reaching IDR 121.9 trillion in 2024. The DBH CHT earmarking mechanism institutionalises a link between tobacco revenue and regional health funding that Nigeria’s general appropriations approach cannot replicate without explicit legislative reform. Nigeria’s framework, despite the NTA’s ambitious consolidation, remains marked by the legacy of policy instability, rate reversals, underdeveloped enforcement, absence of minimum price mechanisms, and inadequate WHO FCTC alignment.

Ultimately, the comparative lesson is this: effective excise law is not merely about setting rates. It requires constructing a durable institutional ecosystem, principled legal definitions, stable and automatically adjusted rate trajectories, robust enforcement tools, meaningful earmarking, and WHO FCTC alignment that simultaneously delivers fiscal revenue and public health outcomes. Both Indonesia and Nigeria have made meaningful progress toward this ideal; neither has yet achieved it. The path forward requires sustained political will to resist industry pressure, prioritise public health, and treat excise taxation as the dual fiscal-regulatory instrument it was designed to be.

9. TABLE OF LEGISLATION

Indonesia

Undang-Undang No. 11 Tahun 1995 tentang Cukai [Law No. 11 of 1995 on Excise].

Undang-Undang No. 39 Tahun 2007 tentang Perubahan atas Undang-Undang No. 11 Tahun 1995 tentang Cukai [Law No. 39 of 2007 on Amendments to Law No. 11 of 1995 on Excise].

Undang-Undang No. 28 Tahun 2009 tentang Pajak Daerah dan Retribusi Daerah [Law No. 28 of 2009 on Regional Taxes and Regional Levies].

Undang-Undang No. 7 Tahun 2021 tentang Harmonisasi Peraturan Perpajakan [Law No. 7 of 2021 on Tax Harmonisation (HPP Law)].

Undang-Undang No. 1 Tahun 2022 tentang Hubungan Keuangan antara Pemerintah Pusat dan Pemerintahan Daerah [Law No. 1 of 2022 on Fiscal Relations between Central and Regional Governments].

Peraturan Menteri Keuangan No. 191/PMK.010/2022 tentang Tarif Cukai Hasil Tembakau [Ministry of Finance Regulation No. 191 of 2022 on Tobacco Excise Rates].

Peraturan Menteri Keuangan No. 160 Tahun 2023 tentang Tarif Cukai Minuman Mengandung Etil Alkohol [Ministry of Finance Regulation No. 160 of 2023 on Alcohol Excise Rates].

Peraturan Pemerintah No. 28 Tahun 2024 tentang Pengendalian Zat Adiktif [Government Regulation No. 28 of 2024 on Control of Addictive Substances].

Nigeria

Customs and Excise Management Act, Cap C45, Laws of the Federation of Nigeria 1990.

Finance Act 2021.

Finance Act 2022.

Nigeria Tax Act 2025 (signed into law 26 June 2025, effective 1 January 2026).

Nigeria Tax Administration Act 2025.

Nigeria Revenue Service (Establishment) Act 2025.

2026 Fiscal Policy Measures and Tariff Amendments (Circular signed by the Minister of Finance, effective 1 April and 1 July 2026).

10. TABLE OF INTERNATIONAL INSTRUMENTS

WHO Framework Convention on Tobacco Control (Geneva, 2003) 2302 UNTS.

WHO FCTC Conference of the Parties, Guidelines for Implementation of Article 6: Price and Tax Measures to Reduce the Demand for Tobacco (adopted COP-3, Durban, 2008; revised COP-6, Moscow, 2014).

ECOWAS West African Health Organisation, Directive on Tobacco Taxation in ECOWAS Member States (2023).

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