Indonesian Packaging Industry Tax on plastic packaging may dehydrate packaging growth Meanwhile, another tax is going to hit the plastic packaging sector. Recently, the Indonesian government said that it will levy an excise tax of Rp200 on all food and beverages packed in plastic packaging before the end of 2016. According to preliminary information from the Finance Ministry, the excise will be imposed on bottles, bags and sachets. However, lower rates may apply for companies that focus on recycling activities. It is expected that the higher price of products packed in plastic materials will discourage consumption of these products and therefore there will be less plastic waste.
Plastic packaging, like shopping bags, are charged Rp200 a piece
By imposing this additional excise tax, the government's tax revenue will rise. Given that Indonesia's tax revenue has been disappointing so far this year (and has been disappointing in recent years) the government is eager to find new sources of income. Since most Indonesians have the habit of consuming plastic-wrapped snacks and bottled drinks, this excise tax constitutes a great source of revenue. However, the plan for the tax has been met with fierce resistance, especially from stakeholders active in Indonesia's food and beverage and packaging sectors. Affected sectors have said that if implemented, this move could impede the industry, dent sales and even cut down jobs. The Indonesian Food and Beverages Association (Gapmmi) said the tax would burden customers. Along the same lines, the Indonesian Olefin and Plastic Industry Association (Inaplas) says that consumers would be left without any alternative form of practical packaging. The association furthers that plastics remain the best wrapping material, compared to paper, glass, steel or aluminium, and for manufacturing, because plastics need the least energy.
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"Plan for the tax has been met with fierce resistance, especially from stakeholders active in Indonesia's food and beverage and packaging sectors." Gapmmi also says it could weaken Indonesia's industrial competitiveness in ASEAN. This could then hinder development of Indonesia's manufacturing industry (perhaps giving rise to more food and beverage imports from abroad). The Forum of the Associations of Plastic Using and Producing Industries (FLAIPPP) said the tax would cost the government Rp528 billion in losses annually from other sources of revenue such as sales and income taxes and slower sales of food and beverages in plastic packaging. Inaplas and other organisations say the government should focus on the development of good waste management systems, instead of using the excise as a tool to gain additional revenue. Are free trade agreements the way out? Despite the downside of the excise duty on plastic packaging, the industry can still fill its cup with other opportunities. A new free trade agreement (FTA) between Indonesia and the EU, its fourth largest trading partner is also being negotiated. Indonesia is the sixth ASEAN nation to negotiate a bilateral FTA with the EU that facilitates trade and investments and covers a broad range of issues, including customs duties and other barriers to trade, services and investment, access to public procurement markets, as well as competition rules and protection of intellectual property rights. Included also is a comprehensive chapter aiming to ensure that closer economic relations between the EU and Indonesia correspond with environmental protection and social development. Clinching the trade agreement would represent a huge market of 750 million consumers. Trade in goods between the EU and Indonesia amounted to over EUR25 billion in 2015 with EU exports worth almost EUR10 billion and EU imports from Indonesia worth more than EUR15 billion, resulting in over EUR5 billion trade surplus for Indonesia, according to the communication issued by the EU. Products exported by Indonesia are machinery and appliances, textiles and footwear, plastic and rubber products, and agricultural products. The EU exports to Indonesia mostly industrial products, including machinery and appliances, transport equipment and chemical products. Indonesia benefits from the EU's one-way customs duty discounts for developing countries under the standard Generalised Scheme of Preferences (GSP).