The outgoing government of Indonesia has scrapped plans to introduce a plastic excise tax in its budget for the 2025 fiscal year.
Plans for the tax were first introduced in 2016 but only in 2022 did the government signal it was planning to introduce the levy. Indonesia’s budget included a revenue collection target for the levy for the first time in 2023 at IDR 980 billion (€57 million). The 2024 fiscal budget of Southeast Asia's largest economy raised the target to IDR 1.85 trillion.
Now, the government has scrapped its plans and did not include the excise tax on plastic products on its 2025 budget. Commenting on the new budget, the head of the Fiscal Policy Agency (BKF) of the Ministry of Finance, Febrio Kacaribu, did not explain the decision to scrap the plastic tax but said the government would press ahead with its plans to implement a levy on packaging for sweetened beverages.
The plastic levy would have been a considerable source of revenue in a country where tap water is not safe to drink and people are highly reliant on plastic bottles in particular. The draft 2025 budget says its proposes to meet its overall revenue collection targets through levies on packaged sweetened beverages, alcoholic beverages, and tobacco products.
In December 2023, the Indonesian Olefin, Aromatic and Plastic Industry Association (Inaplas) criticised the government’s plans to introduce a levy for both plastic and sweet beverage packaging arguing that it would financially burden consumers and result in higher imports in detriment of local production.
Indonesia is the second-largest plastic polluter in the world after China, according to the United Nations. In a 2020 report, the institution estimated that the Southeast Asian country produces 3.2 million tonnes of unmanaged plastic waste a year, of which about 1.29 million tonnes end up in the sea.
While its plastic recycling rate stands at only 7%, the country has recently introduced five key strategies to reduce ocean plastic pollution by 70% in 2025. These focus on reducing plastics production and use, diminishing land- and sea- leakage, improving behavioural change, and stepping up funding mechanisms, where support from international organisations are expected to play an important role.