17 November 2019 (closed)
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The plan of Indonesia's government to set an excise tax of between IDR 2,000 and IDR 3,000 (approx. USD $0.18) per liter on carbonated (soda) drinks met fierce resistance from several institutions. Based on Indonesian law, consumption of goods that have a negative impact on consumers' health or the environment need to be controlled and monitored. The Soft Drinks Industry Association (Asrim), Indonesian Food and Beverage Association (Gapmmi), and Indonesian Employers Association (Apindo) all consider this move to be negative for the country's soft drinks industry.
Research conducted by the University of Indonesia's Institute for Economic and Social Research (LPEM-UI) in 2013 shows that such an excise tax would indeed manage to raise an additional IDR 590 billion (approx. USD $42.1 million) per year (based on a sales volume of 196.6 million liters). However, results of the research also show that the excise tax would lead to a 37.8 percent price hike and a 64.9 percent drop in soft drinks demand, which would then drag down Indonesia's state income from value-added tax and company taxation incomes. As such, the LPEM-UI claims that the move would eventually lead to an annual loss of around IDR 673 billion (approx. USD $48 million).
Entrepreneurs active in Indonesia's soft drinks industry also oppose the government's plan to raise the excise tax on soft drinks. According to them, public health is not at risk as the country's per capita soft drinks consumption is still low at 2.4 milliliter (per person/per day). Moreover, the tax may curb investment in this industry and could cause layoffs.
Indonesia's Ready-to-Drink Beverages Market, 2010-2014:
in million liters