Indonesia Explores Extending Excise Tax to Consumer Goods

Potential New Tax Items Under Consideration

The Indonesian Ministry of Finance, led by Minister Purbaya Yudhi Sadewa, is conducting a comprehensive study on expanding the excise tax regime to include various consumer goods. The items under consideration include diapers, disposable eating and drinking utensils, and wet wipes. This development is part of the Ministry's broader strategic planning as outlined in the Ministerial Regulation No. 70 of 2025, which details the Ministry's Strategic Plan for the period 2025-2029.

Rationale Behind the Proposed Expansion

The primary motivation behind this study is to assess the potential revenue that could be generated for the state if these additional goods were subjected to excise tax. The Ministry is exploring the possibility of broadening the tax base to include these consumer products, which are increasingly prevalent in daily life. The decision to study these specific items follows previous research conducted during the 2020-2024 period, which examined the potential excise tax implications for luxury goods, sugary beverages in packaging, and various plastic products such as plastic bags, multilayer plastic packaging, styrofoam, and plastic straws.

Implications of the Proposed Excise Tax Expansion

If implemented, the expansion of excise tax to these new categories could have significant implications for both consumers and manufacturers. For consumers, it could lead to increased prices for these everyday items, potentially affecting consumption patterns. For manufacturers, it might necessitate adjustments in production costs and pricing strategies. The government, on the other hand, could benefit from additional revenue streams, which could be directed towards public expenditures or used to offset other fiscal needs.

Next Steps in the Process

While the study is currently underway, the actual implementation of any new excise taxes would likely involve further regulatory steps and stakeholder consultations. The Ministry's Strategic Plan, as outlined in the recent regulation, suggests a systematic approach to identifying and evaluating potential new sources of tax revenue. As the study progresses, it is expected that more detailed analyses will be conducted to determine the feasibility and potential impact of extending excise taxes to the identified consumer goods.