Indonesia's Plan to Impose Excise Tax on Plastic Packaging Meets Resistance
Three Indonesian sectors are expected to be negatively affected by the government's proposal to impose an excise tax of at least IDR 200 (approx. USD $0.02) on plastic bottles and packaging. These three sectors are the food & beverage sector, the packaging sector, and petrochemicals. Last week, the Indonesian government unveiled its plan to introduce a new excise tax in an effort to collect additional tax money, while protecting the environment as the tax should lead to a reduction in consumption of plastic products. However, the plan led to fierce criticism from dozens of industry associations.
Fajar Budiono, Secretary-General of the Aromatic, Olefin and Plastic Industry Association (Inaplas), said the government's proposal to impose an excise tax on plastic bottles and packaging would actually jeopardize the government's program to develop the nation's manufacturing industry (and as a consequence would jeopardize the nation's whole economy). The plan would curtail sales of drinks (that use plastic packaging) and undermine sales of plastic. It may in fact lead to fewer tax revenue as consumers will purchase less plastic bottled drinks due to the higher price. Therefore, Inaplas objects to the government's proposal.
A higher excise tax on plastic bottles could - in theory - be a major source of tax revenue for the government because bottled drinks are very popular in Indonesia (particularly drinks such as water, ice tea, soda and juice). Unlike the case in many advanced economies, tap water is not safe to drink and therefore Indonesians are highly dependent on water packaged in plastic. In Indonesian households usage of 19-liter gallons of water to quench thirst or for cooking purposes is common (these gallons will most likely not be subject to the new excise tax) but, when on the road, Indonesians usually bring their small plastic water bottles (which are subject to the new tax proposal according to government information).
This is also a reason for Budiono to object to the government's proposal. Because easy access to clean water (including a low price) is regarded a primary right of the people, the government should not touch this segment in order to try collecting new tax money. Lastly, Indonesians need to have cheap, safe and long-lasting packages for food products as food consumption is also a basic right of the people. As of yet there is no other material (having the same above-mentioned characteristics as plastic) that can replace plastic for this purpose.
According to Inaplas the move to impose an excise tax on plastic bottles and packaging could in fact lead to an increase in imports of foreign food and beverage products (that use plastic packaging) because these foreign-made products are not burdened by such a tax.
Whether the excise tax will be imposed remains unclear and depends on discussions between the Indonesian government and the House of Representatives (DPR). These talks will start soon. If approved, the new excise tax could be implemented later this year or in 2017.
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. In February 2016 the government of Indonesia introduced a charge on plastic bags in 22 cities across the archipelago (initiated by Indonesia's Ministry for the Environment and Forestry) as a (six-month) trial. For each plastic bag a minimum IDR 200 is charged. This measure has been imposed on all retailers such as supermarkets and vendors.
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Free bags per January 1, 2016 banned in the Netherlands, following the European directive to reduce the use of plastic carrier bags . Retailers are free to set the price. The target price for a plastic bag is € 0.25 .