Alcohol Policies, Consumption and Government Revenue: Indonesia

Abstract

Research on alcoholic beverage consumption and related policies in Indonesia is minimal. Therefore, this study examines how policies affect alcohol consumption and government revenue, specifically excise tax revenue. First, this paper discusses the effect of alcohol tax policies and finds that an increase in the excise tax leads to increased product consumption. The implication is that the government must consider reform of the unrecorded alcohol market and alcohol tax. Subsequently, this paper discusses the effects of alcohol policy change and shows that tax changes lead to short-term reductions on alcohol consumption; thus, the government may perform frequent policy changes to reduce consumption. This paper also shows that a total ban negatively affects consumption; however, the reduction only affects the recorded alcohol supply, which is taxed and within government control.