INDONESIA – The Indonesian government is considering the implementation of an excise tax of at least IDR 200 (US$0.02) on plastic bottles and packaging.
This proposal is part of talks about revisions to the 2016 State Budget, and discussions between the government and Indonesia's House of Representatives (DPR) are expected to take place sometime in April 2016.
If Indonesia's DPR agrees with the proposal to impose a tax on plastic bottles, the new measure could be implemented before end-2016. According to the Finance Ministry the government proposes an excise tax in the range of IDR 200 to IDR 500 per bottle. Larger gallon water bottles not be subject to this new tax.
Explaining the rationale for the excise tax, Indonesian Finance Minister Bambang Brodjonegoro said the consumption of plastic bottles needs to be curtailed because they are not good for the environment and is costly for the government to deal with plastic trash.
He added that - besides bottled drinks - the new excise tax may also be imposed on plastic packages for items such as cooking oil.
Nasruddin Djoko Surjono, head of duty and exchange at the Finance Ministry's fiscal policy office, was quoted by local media Jakarta Globe as saying the new tax is necessary because “We need new excise objects as our excise revenue has dropped in the first quarter this year.”
Excise revenue dropped to Rp 7.9 trillion (US$602 million) in the first three months this year, down 67% from Rp 24 trillion in the same period a year earlier.
Adhi Lukman, General Chairman of the Indonesian Food and Beverage Association (Gapmmi), has objected to the excise tax proposal and said it will have a negative impact on the country's food and beverage industry.
Instead of a tax, Lukham suggested it would be better if the government focuses on optimizing collection of existing taxes, and added, "Moreover, plastic bottles is highly recyclable. Just go to any landfill and you would barely see plastic bottles there; it is the first thing any scavenger would pick up."
Meanwhile, Enny Sri Hartati, Director at the Institute for Development of Economics and Finance (INDEF), says the measure may backfire because - if consumption of plastic packaged products declines - the government ends up with less tax revenue. The additional tax may also reduce the attractiveness of the investment climate in Indonesia and reduces the country's competitiveness.