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The Indonesian Ministry of Finance has scrapped its long-debated plan to introduce an excise tax on plastic products, a policy initially intended to tackle the country’s severe plastic waste problem while raising additional revenue. The decision comes after years of discussions and opposition from industry groups concerned about the potential economic fallout.
The excise tax, first proposed in 2019, targeted single-use plastic items such as bottles, bags, and packaging, to reduce plastic waste and mitigate environmental damage. The plan would have imposed a tax of IDR 200 (approximately USD 0.02) per plastic bottle, a move that was expected to significantly reduce plastic consumption, particularly in the food and beverage sector, where plastic packaging is widely used. Indonesia, the world’s second-largest producer of plastic waste after China, has faced increasing pressure from environmentalists to enforce stricter regulations.
However, the proposal encountered strong resistance from key industry stakeholders, including the Aromatic, Olefin, and Plastic Industry Association (Inaplas). These groups argued that the tax would have a detrimental effect on Indonesia’s manufacturing sector, particularly for food and beverage companies that rely heavily on plastic packaging. Fajar Budiono, Secretary-General of Inaplas, warned that the excise could reduce domestic demand for plastic products and might even lead to increased imports of foreign goods not subject to the same taxes. Budiono also emphasized that plastic remains a crucial packaging material due to its durability and cost-effectiveness, with no viable alternatives currently available.
Critics also pointed out that the tax would disproportionately impact consumers, especially those who rely on affordable bottled water in regions where tap water is unsafe to drink. Budiono cautioned that the excise would raise prices on essential items, placing an additional burden on the public during a time of economic recovery.