Edition 5: The Carbon Tax Pushed Back Again
The Carbon Tax Pushed Back Again
Source: Loïc Manegarium / Pexels
On Friday June 24th, the Ministry of Finance (Kemenkeu) postponed the implementation of the carbon tax again until an unspecified date. This is the second delay so far, with the first delay being from the original date of April 1st to July 1st.
The carbon tax is based on the recently passed Law Number 7 Year 2021 on the Harmonization of Tax Regulations (UU HPP). It aims not only to increase the State Budget (APBN) earnings, but to also encourage economic players to move toward low-carbon activities.
According to the head of the Fiscal Policy Agency Febrio Kacaribu, a reason for the delay is due to various global economic conditions. These include the increase in food and energy prices along with the rising domestic inflation rates. As such, the government aims to safeguard the national economy first.
Additionally, the Ministry emphasized the need for more time to refine the technical policies surrounding the scheme. This includes coordinating with various other ministries and institutions for effective implementation.
Tax researcher Fajry Akbar agrees with the delay. He argued that since other countries are also relaxing their fossil fuel taxes as a response to the increase in energy prices, it is not the right time to implement the carbon tax.
Instead, he advocates for implementing it without the actual taxation first to ensure that the administrative requirements will be ready by the time the government is ready to fully implement the carbon tax.
This policy is highly anticipated as part of Indonesia’s commitment to reduce carbon emissions by at least 29% by 2030. Moreover, this comes as it prepares to host the G20 leaders summit in November.
However, some say that the tax rate of Rp 30,000 (US$2.03) per ton of CO2 equivalent is too low to discourage high-carbon activities. Researchers from Monash University also said that there will not be any significant impacts if it is not followed up with decreasing subsidies for fossil fuel energy.
Some also expressed a lack of confidence that the administrative requirements for implementing the carbon tax will be ready very soon. This might be due to the lack of political support and urgency for climate change and especially on an increase in taxation.
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