Indonesia May Impose Excise Tax on Plastic Bottles & Packaging
The government of Indonesia proposes to impose an excise tax of at least IDR 200 (approx. USD $0.02) on plastic bottles and packaging. This proposal is part of talks about revisions to the 2016 State Budget (APNB-P 2016). Later this week, the government will discuss the matter with Indonesia's House of Representatives (DPR). Around the globe several countries (including Great Britain and India) have imposed such an excise tax on plastic bottles and packages, both for additional tax revenue and as a measure to protect the environment.
If Indonesia's DPR agrees with the proposal to impose a tax on plastic bottles, the new measure could be implemented before the end of the year. According to preliminary information from Indonesia's Finance Ministry the government proposes an excise tax in the range of IDR 200 to IDR 500 per bottle. However, larger bottles and gallons will not be subject to this new tax. Bottled drinks (such as water, ice tea, soda or juice) are very popular in Indonesia. As tap water is not safe to drink Indonesians are highly dependent on bottled water. Usually Indonesian households use 19-liter gallons of water to quench thirst or for cooking purposes (such gallons will most likely not be subject to the new excise tax) but when on the road Indonesians usually bring the small bottles.
Indonesian Finance Minister Bambang Brodjonegoro said consumption of plastic bottles needs to be curtailed because these products are poison for the environment (it can take up to 100 years for plastic items to biodegrade) and it brings costs 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.
Adhi Lukman, General Chairman of the Indonesian Food and Beverage Association (Gapmmi), objects to the government's plan to impose an excise tax on plastic bottles and packages. Lukman, who is concerned that the new tax will have a negative impact on the country's food and beverage industry, said it would be better if the goverment focuses on optimizing collection of existing taxes. 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.
Indonesia's Plastic Bags Tax
In February 2016 Indonesia had already introduced a charge on plastic bags in 22 cities across the archipelago (initiated by Indonesia's Ministry for the Environment and Forestry). For each plastic bag a minimum IDR 200 is charged. This measure - which is a six-month trial - has been imposed on all retailers such as supermarkets and vendors.
After China, Indonesia is the world's second-largest plastic waste producer. Each year Indonesians use approximately 187.2 million tons of plastic according to a study published in the journal Science. Meanwhile, Greeneration Indonesia estimates plastic bag usage from modern and traditional retailers in Indonesia at 700 per person per year, or 178.5 billion bags.
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If the purpose of this tax is to decrease the consumption of plastic, the government should also increase the incentives of using eco-friendly container such as paper. Moreover the tax should also be refundable if the buyer return the plastic bottle for recycling (this policy has been implemented in developed countries such as USA, Canada).