This study examines the economy-wide impacts of cigarette excise tax reform in Indonesia using Input-Output (IO) analysis. While policy debates on cigarette excise tax reform often focus narrowly on the concern of job losses in the tobacco sector, this research conducts a broader analysis that captures the linkage of sectors across the whole economy. It models how the higher cigarette excise taxes and the simplification of the cigarette excise tax tier structure affect not only cigarette consumption and government revenue, but also economic output, aggregate household income, and employment levels across the entire economy. The analysis evaluates twelve tax reform scenarios that combine different excise tax tariff increases and tier-simplification options under four government revenue allocation schemes.

The findings show that well-designed cigarette excise tax reform consistently produces net positive macroeconomic outcomes across all simulated scenarios. Under the scenario generating the largest macroeconomic gains, a 50% increase in excise tax rates combined with comprehensive simplification of the excise tax tiers, the analysis estimates a net increase of approximately Rp315.1 trillion in economic output, Rp81.7 trillion in household income, and 1.14 million jobs. These results demonstrate that tobacco taxation is not only a public health measure but also an effective fiscal and economic policy instrument.