The House of Representatives has approved a proposal from the Finance Ministry on the imposition of excise tax on plastic bags in Indonesia, which aims to increase state income as well as reduce the use of plastic bags in the country.

The proposal specifically targets plastic bags less than 75 microns thick. The government also plans to impose an excise tax of Rp 30,000 (US$2.10) per kilogram of plastic bags. However, the ministry is still redrafting the policy to include all kinds of plastic packaging

The government’s plan to impose the plastic bag excise tax is a progressive step in response to the environmental issues that stem from plastic pollution. According to the Marine Debris Hotspots Rapid Assessment for Indonesia that the World Bank (WB) conducted in 2018, Indonesia ranks second behind China in the world as top plastic polluter. Finance Minister Sri Mulyani Indrawati also claims that the country produces 170 million kilograms of plastic waste per year.

An example of the devastating effects of plastic pollution includes a heartbreaking tragedy that occurred in 2018, when a whale was found dead from ingesting 6 kg of plastic in the waters off Kapota Island in Wakatobi National Park.

In following up on its plan to impose excise tax on plastic bags, the government should consider a broader strategy to combat plastic pollution through partial and total bans.

Imposing excise tax is an important step toward a partial ban, as it aims to reduce the use of plastics. In this scenario, however, the government should also provide clear regulations on large-scale plastic waste management. Imposing an excise on plastic bags will be ineffective at reducing plastic pollution without proper management of plastic waste.

For instance, according to the WB marine assessment of 2018, the Indonesian coastal population generated mismanaged waste in 2010 at a rate of 3.22 million tons per year. At present, around 0.48-1.29 million metric tons of mismanaged waste enter the seas annually. This data indicates that the government has failed to manage plastic waste effectively.

The government has issued Law No. 18/2008 on waste management, but no technical regulations on plastic waste management have been implemented. As such, the government needs to issue implementing regulations on proper waste management procedures for plastics, such as on mandatory plastic waste management for local governments through the use of waste banks, on recycling plastic waste or on the obligatory use of renewable energy to develop plastic products for the relevant industries (e.g. plastic manufacturers).

A strategy for a partial ban on plastics serves as a “wake-up call” for businesses that could be impacted by the ban. At this time, such entities should prepare by actively producing more environmentally friendly products that curb the use of plastic. Likewise, a partial ban may open opportunities for startups to establish environmental businesses that specialize in plastic waste management.

A But a simple question may arise in relation to the government’s recent plan to impose a plastic bag excise: Why is it only taxing plastic bags instead of all products that contain plastic, such as plastic bottles and plastic household appliances?

At a glance, the government is being careful not to hurt the economy. Immediately implementing such a comprehensive tax might disrupt the plastic manufacturing sector and the businesses that rely on it, which could potentially impact millions of Indonesians. Therefore, in this scenario, the government needs a well-prepared timeline to reduce and even stop the use of all plastics in Indonesia. That being said, once the partial ban has been implemented successfully, the government can then move forward with implementing a total ban on any and all plastic use in the country.

In order to prepare for a successful shift from a partial ban to a total ban, the government should periodically evaluate the use of plastic bags in the country, and whether the policy has succeeded in reducing the use of plastic bags. There should also be a rational indicator for measuring the level of success in policy implementation. For instance, if the use of plastic bags is reduced more than 50 percent as a result of the policy, then the government can progress to the next step in the strategy.

In its subsequent step, the government should boldly tax all materials containing plastic and not just plastic bags, as well as regulate strict punishment for violators. If this move effectively reduces the use of plastic materials, then the government can take the final step of prohibiting the use all plastics. Central-regional cooperation across the country’s 34 provinces should be regulated clearly in this regard. The central government might instruct local administrations to issue a regulation banning the use of all forms of plastic, including actively campaigning to prohibit the use of plastics in rural and urban areas.

The tax policy on plastic bags is the right step toward curbing the behavior of Indonesian consumers that rely heavily on plastic products. It is understandable that under the current condition, the government faces a dilemma on whether it should prioritize protecting the economy by implementing a policy for a partial ban, or protecting the environment through a total ban.

However, the government is generally on the right track in proposing an excise tax on plastic bags now as a first step to create awareness among the public, businesses and industry to save and protect the environment, which will hopefully evolve in the next five years to free Indonesia from the use of all plastics.

______

Both writers are specialist lawyers in shipping and international trade (customs and excise), aviation, insurance and reinsurance at Budidjaja International Lawyers. The views expressed are their own.

Popular

Is Indonesia really ready to embrace dual citizenship?

Tens of thousands seek better lives in Jakarta. But is the city losing its draw?

Elon Musk's Starlink granted licences to operate in Indonesia