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

The findings show that well-designed excise tax reform produces net positive macroeconomic outcomes in every scenario simulated. Under the most impactful scenario, a 50% excise tax increase combined with full tier simplification, the analysis estimates a net increase of approximately Rp 315.1 trillion in economic output, Rp 81.7 trillion in household income, and 1.14 million jobs.

These results demonstrate that tobacco taxation is not only a public health measure but also a sound fiscal and economic policy instrument.