Indonesia Explores Excise Tax on Diapers and Wet Wipes: Economic Implications

Ministry of Finance's Strategic Plan Reveals Potential New Taxation

The Indonesian Ministry of Finance is considering implementing an excise tax on diapers and wet wipes as part of its strategic planning for 2025-2029, as outlined in Ministerial Regulation No. 70/2025. This potential policy has sparked discussions among economists regarding its impact on household expenses and the industry.

Economic Concerns and Potential Impact

Teuku Riefky, an economist from LPEM FEB UI, expressed concerns that introducing excise tax on these essential household items could directly pressure consumer purchasing power, particularly affecting lower-middle-class families who rely heavily on diapers and wet wipes. Riefky highlighted that such a policy could lead to inflation in household goods.

Industry Resilience and Demand Stability

Despite these concerns, Riefky also noted that the production and investment in the diaper and wet wipe industry might remain stable. The rationale is that these products are considered semi-essential commodities with relatively inelastic demand. Therefore, while consumers might feel the pinch, manufacturers could potentially absorb or pass on the tax without significant impact on their operations or investment plans.

Policy Context and Future Directions

The Ministry's consideration of this excise tax is part of a broader strategic plan to optimize state revenues. As the policy is still under study, stakeholders are closely monitoring its development, weighing the potential revenue gains against the possible economic and social impacts.