Published On: Tue, Jun 28th, 2016

Plastic excise plan draws mixed reactions

Indonesians have a fond relationship with the plastic bags and packaging that eases many aspects of their lives, from shopping at markets to having a cold mineral water on a sunny day.

However, environmental concerns caused by mounting plastic waste have made several retailers take measures to reduce the wide use of plastic bags, such as by charging Rp 200 (1.5 US cents) for each bag used by consumers at their shops. This year’s Jakarta Great Sale was even themed “Shop More, Less Plastic”, urging shoppers to bring their own reusable bags. The government has also jumped on the bandwagon by preparing a regulation to impose an excise on plastic packaging.

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Plastic excise plan draws mixed reactions

The Finance Ministry’s fiscal policy head Suahasil Nazara said the government was currently discussing the excise, citing environmental issues as reasons for urgency.

“We also want excise [revenue] not to rely on just one or two products. A diversification will be good for the state budget,” he said on Thursday. Currently, only tobacco products and alcohol are subject to excise charges.

However, the packaging excise plan has been flat out rejected by industries.

As many as 15 industry associations, under the Forum of the Associations of Plastic Using and Producing Industries (FLAIPPP), including the Indonesian Food and Beverages Association (GAPMI), stated the proposed policy would be contra-productive as it did not solve the plastic waste issue and would hamper the growth of the industries.

The forum has run several simulations with the University of Indonesia’s (UI) economy and business school to measure the economic impacts of the excise.

“The government will suffer a loss of more than Rp 528 billion [US$39.43 million] from the excise,” said FLAIPPP representative Rachmat Hidayat in the forum’s statement circulated over the weekend.

The simulations used an excise assumption of Rp 50 for a cup and Rp 200 for a plastic bottle, from which the government was projected to collect around Rp 1.9 trillion in revenue in a year.

However, the beverages industry would see its sales revenue dropped by Rp 10.2 trillion during the same period, resulting in a Rp 2.4 trillion drop in value-added tax and income tax paid to the government.

The study used monthly demand data from January 2013 to January this year.

Similarly to taxes, excises would increase prices paid by end-customers, reducing people’s disposable income and lowering their purchasing power, said Eugenia Mardanugraha, a University of Indonesia researcher and the economy and business school’s small and medium enterprises center director.

Rachmat was of the view that the excise implementation would be contrary to President Joko “Jokowi” Widodo’s administration’s deregulation policy, asserting that in principal, excise implementation was not for increasing state revenue.

In a recent interview with The Jakarta Post, customs and excise director general Heru Pambudi said excise implementation should not be seen solely as a source of revenue but as a tool for controlling the distribution and consumption of products that adversely impact on public health or the environment.

He stated there would be exemptions or lower rates for companies whose plastic products had less effect on the environment, through recycling activities for example.

“We are discussing the range of the rates, which will depend on the plastic types,” he said, adding that the excise would be imposed on all kinds of plastic packaging, from bottles to bags and sachets.

The government has already included projected revenue from the plastic excise in the revised state budget draft, which is currently being deliberated at the House of Representatives to be passed this month. The plan is to collect Rp 148.1 trillion in total from excises, higher than Rp 146.4 trillion listed in the original budget.

“If the draft regulation [on the plastic excise] doesn’t pass, I will be helpless,” Heru said.