Companies denounce excise duties on plastic and sugary drinks

JAKARTA: Industry players have complained about a planned excise tax on plastic products and sugary drinks, arguing that it would not solve what it is supposed to solve and would lead to other problems in the process.

Secretary General of the Indonesian Olefins, Aromatics and Plastics Industries Association Fajar Budiono told The Jakarta Post on Monday that the plastic tax would fuel inflation as most products contain plastic, d ‘one way or another.

“It won’t solve anything. This will (on the contrary) lead to new problems,” Fajar said.

Consumers would bear the burden of rising product costs, while micro, small and medium enterprises would be hit hardest as they are the largest users of plastic, Fajar said. Packaging currently accounts for about 5% of the price of products, Fajar said, estimating that the levy would increase that figure to 10 or 15%.

He then claimed that excise duties would completely reform the plastic industry landscape and predicted that most producers would shift to trading as their primary activity, leading to increased imports of plastic products.

“Food and drink producers may then not produce here. They would move to another ASEAN country, for example Johor Baru (in Malaysia) and (import) via Batam. It (would be) cheaper,” Fajar said.

He added that the transition would not be smooth either, as producers would have to invest in new machinery to produce products not affected by the levy, as well as new space needed for this purpose. He estimates the transition would take up to five years, given that just acquiring the equipment would take a full year.

An excise on plastics and sugary drinks had been considered since 2016, but no real action was taken until 2022, when the government included a revenue collection target for this tax in the 2023 budget. The targeted amount was 980 billion rupees for plastics and 3,080 billion rupees for sugary drinks.

However, the government has not yet published implementing regulations specifying which products would be subject to this levy.

With no revenue so far, the government set the 2023 revenue target at zero in a revised budget plan in mid-November and said the policy would not be implemented this year, citing concerns about maintaining economic activity.

Nevertheless, revenue targets for levies were set again in the 2024 budget plan, which President Joko “Jokowi” Widodo approved last week through Presidential Regulation No. 76/2023. The collection targets are 1.85 trillion rupees for excise duty on plastic and 4.39 trillion rupees for sugary drinks.

Despite the figures in the budget, it remains uncertain whether the government will follow through on its plan. “Next year we will monitor the state of the global economy and all developments,” Customs and Excise Director General Askolani explained during a press briefing on November 24.

Business representatives also expressed doubts about the effectiveness of an excise on sugary drinks.

Speaking to the Post on Tuesday, Soft Drink Industry Association President Triyono Prijosoesilo said his organization doesn’t see the tax solving problems with non-communicable diseases like obesity and diabetes.

He said obesity levels in other countries, such as the United States and Mexico, had continued to rise despite a sugar tax, making “the policy ineffective”. — The Jakarta Post/ANN