Irvan Tisnabudi – Indonesia is likely to see higher prices for alcoholic beverages and more black market trading as a result of the government's decision to effectively replace the luxury tax on alcohol with a higher rate of excise tax, industry players said.

Just over a week after the government said it would scrap the luxury tax from April, the Finance Ministry on Tuesday released a decree that raised the excise tax on alcoholic drinks by 100 percent to 214 percent, depending on the alcohol content.

Krisnadi, chairman of the Indonesian Hotels and Restaurants Association (PHRI), told the Jakarta Globe that the move would trigger more black market trading of alcoholic beverages.

"Based on my understanding, the government was cutting the luxury tax for alcoholic beverages to make the [liquor] price cheaper in the market," he said. "But now that they've decided to increase the excise tax for alcoholic beverages it will lead to the same old problems for retailers, such as inadequate supplies and high prices."

Prior to the removal of the luxury goods tax and the increase in the excise tax, many alcoholic drinks cost as much as 500 percent more than their wholesale price by the time they were sold in bars and restaurants. Such high prices led to a growth in illegal imports.

Ipung Nimpuno, a representative of the Indonesian Malt Beverages Association (GMMI), said on Tuesday that the increase in the excise tax could cause prices of alcoholic beverages to soar by 20 percent to 40 percent.

Jonker Hamonangan, head of the Jakarta branch of the Indonesia Customs Services Association (Asakindo), an organization comprised of executives whose businesses sell goods that are subject to excise tax, said the new tax would lead to price increases of 10 percent to 40 percent, depending on the alcohol content.

Christoph Darjanto, who manages the Immigrant bar in Jakarta, said his suppliers will decide whether to raise prices.

"If the price increases, demand and sales will no doubt be affected," he said.

Teguh Yudo Wicaksono, a researcher at the Centre for Strategic and International Studies, said the excise tax rise would have a bigger impact on consumers of type A drinks like beer, who tend to have lower incomes.

"With more money to spend, [those who drink type B and type C drinks] won't be affected too much by the higher price," Teguh said.

Type A beverages have an alcohol level of 5 percent or less. Type B drinks have an alcohol level of 5 percent to 20 percent, and type C drinks contain more than 20 percent alcohol.