UPDATE 1-Indonesia set to sluggish the tempo of tobacco tax hike resulting from a pandemic

* Indonesia will increase tobacco excise tax by an average of 12.5% ​​in 2021

* Increase compared to an average tax increase of 23% this year

* Finance minister says needs to balance health needs with the economy

* Indonesia’s smoking rate is among the highest in the world (Adds context, detail)

JAKARTA, December 10 (Reuters). Indonesia will increase excise tax on tobacco products by an average of 12.5% ​​in 2021, the country’s finance minister said Thursday, highlighting the need to balance efforts to control smoking with the need to support an industry that is a important employer. The increase in 2021 is comparable to the average 23% increase in excise tax this year and could disappoint health groups pushing for stronger action in a country with one of the highest smoking rates in the world.

“We are trying to reconcile the health aspect with the general economic situation affected by COVID-19, especially for workers and farmers,” said Minister Sri Mulyani Indrawati at a virtual press conference.

According to the World Health Organization (WHO), around 70% of adult men in Indonesia consume tobacco products, one of the highest rates in the world, with cigarette prices also being among the lowest of any country.

According to the WHO, around 225,700 people die each year in Indonesia as a result of smoking or illnesses caused by tobacco.

The government has increased taxes on tobacco products almost every year since 2014. However, WHO data shows that the smoking prevalence among adolescents aged 10 to 19 increased by about 20% over a five-year period through 2018, while the prevalence among adults did not decrease, against global trends.

The new excise tax policy, which will come into force on February 1, 2021, aims to reduce the smoking prevalence among adolescents from the current 9.1% to 8.7% in 2024, the minister said.

“The excise tax hike will make cigarette prices more expensive … so they are less affordable,” said Sri Mulyani.

However, she said the tax hike would have no impact on hand-rolled clove cigarette makers, who are dominated by small and medium-sized gamblers.

Tobacco taxes are often controversial in Indonesia. Large tobacco companies often say that a decline in sales affects farmers’ livelihoods and increases the sale of illegal cigarettes. (Reporting by Gayatri Suroyo and Maikel Jefriando editing by Ed Davies)