Indonesia delays implementation of sugary drinks excise despite public health concerns

The Finance Ministry had been entertaining since 2009 the idea of taxing sugary drinks to diversify revenue sources but progress had been slow, mainly due to resistance from businesses.

Nina A. Loasana

Nina A. Loasana

The Jakarta Post


Risky?: An image shows a soft drink sitting on a bed of sugar grains in Paris, taken on Nov. 29, 2017. The NutriNet-Sante study found that artificial sweeteners could increase the risk of developing cancer, but experts not involved in the research say it is not enough proof.(AFP/Joel Saget)

April 13, 2023

JAKARTA – The government has once again delayed the implementation of the long-awaited excise tax on sweetened beverages, raising questions over its commitment to improving post-coronavirus pandemic public health.

The Finance Ministry and the House of Representatives Budget Committee (Banggar) last year agreed to include taxes on sweetened beverages and plastic products in the 2023 state budget, though Finance Minister Sri Mulyani said implementing the excise fees would largely depend on the pace of recovery in 2023.

But Nirwala Dwi Heryanto, director for communication at the ministry’s customs and excise directorate general, said it was unlikely that the plan to tax sugary beverages could be implemented this year as the ministry was still in the process of completing the legal requirements to impose the excise.

“Officials are currently planning to draft a government regulation [PP] as a legal basis to tax sugary drinks while considering the momentum of the country’s economic recovery,” Nirwala told The Jakarta Post on Friday.

“We are planning to propose the excise tax to the House Commission IX overseeing health in May. If all goes well it may be in effect next year,” he added.

The Finance Ministry had been entertaining since 2009 the idea of taxing sugary drinks to diversify revenue sources but progress had been slow, mainly due to resistance from businesses.

In 2020, the ministry again proposed imposing a sugary drink tax with a more detailed scheme, but the proposal was denied by lawmakers due to the economic slump during the COVID-19 pandemic.

Indonesian Food and Beverage Producers Association (Gapmmi) chairman Adhi Lukman told the Post last week that he was skeptical that the excise tax would have any positive impact on public health.

“Processed food contributes only 30 percent of the standard Indonesian diet, so I’m skeptical that cutting down consumption [of sugary beverages] could have a significant impact to prevent noncommunicable diseases [NCDs],” he said.

“Besides, even if the government imposes an excise tax on sugary beverages we’re pretty sure that consumers will still purchase them. So instead of imposing a tax that could put an extra burden on consumers, it’s better for the government to focus on educating the public to choose a healthier diet.”

Combating NCDs

The government’s sluggish progress to implement a tax on sugary beverages has raised questions over the government’s commitment to improving public health, especially amid the Health Ministry’s ongoing effort to reform the healthcare system following the devastating impact of the COVID-19 pandemic.

Health Minister Budi Gunadi Sadikin penned a ministerial regulation in July that instructed regional administrations to follow a national healthcare transformation blueprint that prioritized illness prevention, rather than treatment.

As part of the preventative efforts, the ministry is expanding the national childhood immunization program, offering free screenings for 14 common deadly illnesses, such as, stroke, cardiovascular diseases, cancer and diabetes and intensifying campaigns to encourage healthy lifestyles for Indonesians.

But the ministry’s noncommunicable disease control and prevention director Eva Susanti has said that these efforts alone were not sufficient to curb the country’s growing NCD problem, and that fiscal policy was needed to control the consumption of unhealthy foods to prevent the disease.

“We need to optimize our efforts by pushing manufacturers to reformulate their products so they have lower levels of sugar, salt and fat, such as by imposing an excise on sweetened beverages,” she said in October.

A study suggested that people who regularly drink sugary beverages of one to two servings per day have a 26 percent greater risk of developing type 2 diabetes while another found that those who drink two or more servings per day had a 31 percent higher risk of early death from cardiovascular disease.

Between 1996 and 2014, the annual consumption of sugary drinks in the country increased fifteen-fold, from 51 million liters to 780 million liters. In 2020, Indonesia became the third-highest consumer of sugar-sweetened beverages in Southeast Asia.

Cutting down consumption

NGOs and the public have long called on the government to tax packaged sweetened beverages as soon as possible following the steps of 49 other countries, including neighboring Thailand, Malaysia, the Philippines and Brunei Darussalam.

Thailand’s tax on sugary drinks, for example, has significantly reduced the consumption of carbonated drinks by 17 percent and sweetened beverages by 2.5 percent in the first year of its implementation.

A recent modeling study from the Center for Indonesia’s Strategic Development Initiatives (CISDI) projected that a 20 percent increase in sugar-sweetened beverage prices would reduce its consumption by 17.5 percent on average. Some other studies also suggested that imposing an excise tax of Rp 5,000 (35 US cents) per liter on sugary drinks could prevent between 12,000 and 417,000 cases of obesity in Indonesia in the next 25 years, and around 63,000 to 1.4 million cases of type 2 diabetes.

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