Indonesia' finance ministry has set a policy to implement excise of plastic bag worth Rp200 (US$0.01) a sheet assuming Rp30 thousand a kilogram (kg), with a count of 150 pieces of plastic a kg - Photo: Privacy.

JAKARTA (TheInsiderStories) – Indonesia’ finance ministry has set a policy to implement excise of plastic bag worth Rp200 (US$0.01) a sheet assuming Rp30 thousand a kilogram (kg), with a count of 150 pieces of plastic a kg. With the previous levies, the price of plastic bags after excise is Rp450 to Rp500 a share. This excise is imposed on plastic bags with a type of petroleum base or plastic with petroleum-based ingredients.

In a press briefing on Friday (07/12), Head of the Fiscal Policy Office at the Ministry of Finance Adrianto ensured, the implementation was based on various studies related to the impact of the implementation of excise tax on plastic bags, including the magnitude of inflation. In the calculation of the ministry, the value of inflation from excise is only 0.045 percent.

Adrianto admitted the imposition of excise on plastic bags would affect consumers. Although excise is imposed at the producer level, they will charge higher prices for plastic bags for buyers to end-users, namely consumers. Including people who buy goods in retail or food ingredients on the market.

However, the chain of impacts will not significantly change people’s spending patterns, but rather change spending patterns. That is, if they used to be used to using plastic, it will reduce the use of plastic. Or even be encouraged not to use at all.

The implementation of excise is considered not to disturb the economy as a whole because in some regions where regulations on restrictions on the use of plastics such as Bali and Bogor, the economy does not experience a slowdown.

In addition, the excise tax on plastic bags will also not hamper investment. Because its role is only 6.5 percent of the overall plastic industry. Not only Indonesia, but almost all countries in the world have carried out plastic bag controls in the form of prohibitions, restrictions or imposition of excise.

The implementation of this policy also aims to reduce the circulation or use of plastic in Indonesia. Based on Jambeck’s research, et al (2015), Indonesia ranks second as the largest producer of plastic waste into the sea in the world. And 62 percent of Indonesia’s plastic waste is plastic bags.

Previously, Finance Minister Sri Mulyani Indrawati explained that this excise depends on the type of plastic bag. For example, the decomposition of virgin plastic seeds can be up to 100 years subject to higher excise, while plastic is more environmentally friendly or when it takes only 2 to 3 years to be charged with lower excise.

However, Director General of Customs and Excise Heru Pambudi said earlier this week that the plastic excise tariff for vegetable-based plastic bags could be lower than Rp30,000 per kg.

According to him, the government does not apply a single tariff because the tariff is intended for plastic that is not environmentally friendly. While for environmentally friendly ones, it must be applied underneath, some even zero (for example from cassava or corn).

This policy had previously been rejected by the Ministry of Industry because it would have an impact on the decline in the growth of the food and beverage industry because this industry is one of the sectors that support domestic exports which accounts for 33 percent of the country’s foreign exchange. Moreover, this industry is included in the 10 industries that provide substantial income in the country.

At present, the plastic and rubber industry consistently shows positive performance. Throughout 2018, the plastic and rubber industry grew by 6.92 percent, an increase from 2017’s growth of 2.47 percent.

The plastic and rubber industry also makes a significant contribution to the GDP of the non-oil and gas processing industry. In 2018, it contributed Rp. 92.6 trillion or 3.5 percent higher than in 2017. These conditions have continued to increase over the past five years.

With the new investment, it’s expected that in the next five years a substitution of raw materials for plastic can be reached up to 50 percent.

While the number of plastic industries currently reaches 925 companies with the ability to produce various kinds of plastic products and absorb 37,327 workers. The total production of this sector in 2018 reached 7.23 million tons. Meanwhile, demand for plastic products has increased by an average of 5 percent in the past five years.

With this policy, it can be seen that the synergy between ministries has not been maximized, even though President Joko Widodo will spend his first-term. Previously, economic observer Akbar Tahir stressed, to solve the problem of plastic waste, Indonesia must have management of plastic waste management such as through a good recycling mechanism, and not only with a high excise tax.

With the imposition of excise 100 percent, the price of plastic bags will increase double fold. Thus there will be a decrease in use, which will also have an impact on the production line which will clearly harm the plastic industry in Indonesia, with a large number of workers involved.

Written by Staff Editor, Email: theinsiderstories@gmail.com