Planned groundwater tax hike called off

Bali Governor Made Mangku Pastika said he was disappointed by the regional administration’s failure to increase the groundwater tax on the resort island.

“Bali needs to carefully preserve and protect its limited water resources from overuse,” he said.

The Bali provincial administration had announced it would increase groundwater tax tenfold in an attempt to conserve the island’s groundwater resources in 2010.

However, the 2009 Regional Tax Law stipulates that groundwater tax could only be managed by regional administrations, not the provincial government.

Pastika said the rapid growth of hotels and large-scale tourism related projects had made excessive use of groundwater resources, especially as the city-owned tap water company PDAM was unable to meet the huge demand for clean water.

In 2009, Pastika issued a decree stipulating that the groundwater tax would be increased in 2010, requiring hotels and industries to pay 10 times more than previously.

The tax for groundwater was set at between Rp 27,000 (US$2.95) and Rp 75,000 per cubic meter, compared to only Rp 3,700 per cubic meter before the issuance of the decree.

Pastika justified the hike. “Large hotels and industries use millions of cubic meters of clean water extracted from the ground, lakes, rivers and other water resources.”

The level of water in several large lakes in Bali, such as Lake Batur in Bangli regency, has dropped up to 7 meters, Pastika said, adding that 300 of the 400 rivers on the island had dried up.

“We face a critical environmental tipping point. Water is a precious asset that must be preserved and used wisely. Hotels and industries must pay a higher price for using our water,” he said in a meeting in Bangli over the weekend.

Only three of the island’s nine regencies — Badung, Denpasar and Karangasem — said they were ready to impose the new groundwater tax.

Denpasar municipality spokesman Erwin Suryadharma said,
however, that the city would only charge hotels a tax of Rp 20,520 per cubic meter. “We cannot apply the levels the governor had stipulated,” he said.

Denpasar officials conducted a joint feasibility study with experts from Udayana University before rolling out the new tax.

The city expects to generate Rp 8.5 billion in revenue from the groundwater tax in 2011, Erwin said.

Perry Markus, a hospitality industry lobbyist, said members of hotel and restaurant associations were relieved to hear about the adjusted tax policy.

“Increasing the groundwater tax tenfold would place great pressure on many small hotels and restaurants,” Markus said.

The Bali tax and revenue office said the provincial administration received only Rp 25.9 billion in revenue from groundwater tax in 2010, compared to the Rp 10 trillion in revenues generated by hotels and restaurants in the same year.

Bali consumed 95 million cubic meters of water in 2009.

Made Suarnatha, the director of the Wisnu Foundation, said that both the government and hospitality industry had to be honest and transparent in calculating tax revenues and water usage.

“We must prevent all parties from unfairly exploiting water resources. This requires a strong commitment from all parties, including local communities, to preserve and protect our resources. Bali faces a serious water crisis.”