Page 7 - AsiaElec Week 21 2021

AsiaElec POLICY AsiaElec

Indonesia floats carbon tax in a

bid to reduce emissions

INDONESIA INDONESIA has drawn up proposals to bring it had not been consulted about the plan, but
in a carbon tax to curb greenhouse gas (GHG) warned additional taxes would put further pres-
emissions, in addition to raising VAT rates and sure on what is already a sunset industry.
reforming income tax, as part of a major over- “The second point is, if we’re talking about
haul of the tax system, a finance ministry docu- reducing carbon, we’ve done many practical
ment showed. efforts,” said executive director Hendra Sinadia,
The document provides a more detailed look pointing to reclamation efforts to reduce the rate
at the options the government is considering of deforestation and technology to curb coal
than in a presentation to Parliament earlier this power plant emissions.
week, Reuters reported. In another part of the proposed reforms, the
For the carbon tax, emissions on the use of government is also examining the addition of
fossil fuels such as coal, diesel and gasoline by more bands in personal income tax brackets as
factories and vehicles could be targeted, the part of an attempt to “create a more healthy and
document said, noting there could be a focus on just tax system,” it said, without elaborating.
“carbon-intensive sectors such as the pulp and Indonesia currently has four tax brackets
paper, cement, electricity generation and petro- ranging from 5% to 30%, but there have been
chemical industries”. recommendations from organisations such as
Indonesia is one of the world’s largest GHG the International Monetary Fund to broaden this
emitters, due in large part to a rapid rate of con- to include the middle class and make the system
version of rainforests and carbon-rich peatlands. more progressive.
Noting a carbon tax would add to business Other policy proposals include raising value
costs, the ministry said it should be accompa- added tax rates and removing numerous exemp-
nied with policies to bolster people’s purchas- tions that the government thinks have distorted
ing power “to lower resistance and unintended business competitiveness.
impacts”. A 10% VAT rate is currently applied to most
Revenue from the tax would be used to invest sales of goods and services, with exemptions
in environmentally friendly sectors and welfare given to some agricultural products, staple food
programmes, the ministry said. and healthcare and education services.™
The Indonesia Coal Mining Association said

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