ENVIRONMENTAL TAX: PRINCIPLES AND IMPLEMENTATION IN INDONESIA

Dhian Adhetiya Safitra

Politeknik Keuangan Negara STAN
Afif Hanifah
Badan Kebijakan Fiskal

Alamat Korespondensi: [email protected]

INFORMASI ARTIKEL ABSTRACT

The Covid-19 pandemic, accumulation of waste and
Diterima Pertama
pollution, and the failure to achieve tax targets over the
[15 Januari 2021]
past 5 years prompted the need for immediate resolution
effort. Environmental tax can be an option for state
Dinyatakan Diterima
revenue. This study lists the advantages and challenges of
[31 Maret 2021]
implementing environmental taxes in Indonesia. Apart
from that, this research also tries to examine the
KATA KUNCI: regulations that might encourage the implementation of
Enviromental Tax, Tax Base environmental taxes in Indonesia. This study finds that the
environmental tax applied in Indonesia has not met the
KLASIFIKASI JEL: criteria generally accepted in the international community.
Q580

ABSTRAK

Pandemi Covid-19, penumpukan sampah, penambahan

polusi, dan tidak tercapainya target pajak selama 5 tahun
terakhir mendorong perlunya upaya penyelesaian segera.
Pajak lingkungan kiranya dapat menjadi salah satu opsi
penerimaan negara. Penelitian ini mendata kelebihan dan
tantangan dalam penerapan pajak lingkungan di
Indonesia. Selain itu, penelitian ini juga mencoba
menelaah peraturan-peraturan yang sekiranya dapat
mendorong penerapan pajak lingkungan di Indonesia.
Kajian ini menemukan bahwa pajak lingkungan yang
diterapkan di Indonesia belum memenuhi kriteria-kriteria
yang diterima secara umum di dunia internasional.
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2020), or sweetened beverage tax (Rosyada &

INTRODUCTION Ardiansyah, 2017).
1.1. Background As the state budget continues to struggle to
meet the needs of economic recovery due to the
The impact of the Covid-19 pandemic pandemic, there is a positive side that is felt by
continues through all countries in the world. This the environment unconsciously. The river looks
pandemic indirectly affects economic activity. clearer and the sky looks brighter (Gardiner,
Whether we realize it or not, this has a direct 2020). Unfortunately, this does not apply to solid
impact on state finances. In Indonesia, all waste (Nurhati, 2020). The Covid-19 pandemic
business sectors experienced negative growth encourages individuals to refrain from activities
compared to the previous year, which was outside the home. However, humans adapt and
certainly followed by a decrease in tax revenues. online shopping platforms ultimately bring
It was recorded that in August 2020, there was a together demand and supply. This event is good
contraction in tax revenue by 14.1% compared to for the economy but has an impact on the
last year (Kemenkeu, 2020) environment. The economy heavily influences the
As an impact, tax revenue in Indonesia is tax base, but when the economy is in a sluggish
facing more challenges than already is. Without state budget like it is today, something has
any economic downturn, Indonesia could not persisted, namely consumption, human activities,
reach its tax revenue target in the last 12 years. and their residues, such as waste and pollution in
Tax revenue from 2014 to 2019 only 92.04%, any form. If human consumption and activities
83.29%, 83.48%, 91.23%, 93.86%, dan 86.55% (BI, can form the basis of taxes, can the residues be
2020) even though Indonesian government levied?
already implied tax policy that could boost tax
revenue, such as asset revaluation (Kemenkeu,
1.2. Problem Formulation and Research
2015) and tax amnesty (Setneg, 2016).
There are a lot of options to increase tax
Objectives
revenue, such as [1] increasing the public trust in Less than optimal tax revenue and
the government, [2] simplifying the tax service sustainable environmental problems, both before
and during the Covid-19 pandemic, require
policy, [3] digitalizing tax procedure, and [4]
looking for a new tax base (Estevao, 2019). The complementary policy options. The discourse on
government has been trying to increase public adding an environmentally based tax/excise base
trust by developing public services as well as is thought to be a complementary policy tool.
public facilities. The government also provides Apart from being a source of revenue, global
more simple tax services by opening electronic climate change also requires each country to
services. From registration to the reporting issue policies that consider the environment
process, there is an interaction option for the (Casal, 2012). Based on this background and
taxpayers to the tax authorities by using 3 assumptions, this study aims to review the
popular channels with the branding of 3C, Click, principles of environmental taxes and their
Call, Counter (DJP, 2020). However, tax application in Indonesia.
authorities need to consider new authority policy,
i.e. looking for a new tax. 1.3. The Scope of Research
The tax base consists of 2 groups, central This study is limited to reviewing the
government tax and regional tax. Along the way, literature related to environmental taxes and
there are many discussions about the
describing its application in Indonesia.
implementation of a new tax basis, especially
central government tax, in the form of the type of
the tax and/or the tax object thereof. However, 1.4. Research Methodology
there is no realization of those taxes. So far, the This research is a qualitative research using
Indonesian government has been implementing the literature study method. The search for data
some of the central government tax to the local was carried out with the keywords "pajak
government, such as Land and Building Tax (PBB) lingkungan", "environmental tax" or other related
for rural and urban sectors (P2) and Fees for sources from Google Scholar. This step is done in
Transfer of Rights to Land and Buildings (BPHTB) order to achieve research objectives to review
(Setneg, 2009a). Some of the discussion about the principles of environmental taxes and their
tax/customs are related to plastic excise implementation in Indonesia.
(Kemenkeu, 2019; Yustiani & Maryadi, 2020),
carbon tax/excise (Haryanto, 2016; Sutartib,
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2. LITERATURE STUDY subject of discussion and research for a long time,

2.1. Definition of Environmental Tax but existing research results do not show uniform
There is no specific definition of results. One theory often used as a basis is a
environment tax1, but practitioners and hypothesis of the Environmental Kuznet Curve
researchers have the same understanding about (EKC). EKC Hypothesis shows a relationship
tax implied to preserve the environment between environmental damage and economic
(Markandya, 2012). In addition, it can be defined curve with an inverted U-shape (Selden & Song,
as a tax based on a physical unit that negatively 1994). EKC Hypothesis shows a positive
affects on the environment (Eurostat, 2013). On relationship between environmental damage and
the other side, the OECD (2005) defines the economic curve. However, the relationship
environmental tax as a tax based on a unit that is will be negative at some point, where the higher
proven to have an impact on the environment. the revenue, the lesser the environmental
There is another approach to identifying a damage.
type of tax as an environmental tax or not. This
approach is stated in one of the regulations in the
United Kingdom. It is noted that a tax is said to be
an environmental tax, namely: [1] taxes collected
relating to government objectives related to the
environment, [2] can change/encourage positive
individual behavior in an effort to preserve the
environment, or [3] imposition of it with the aim
2
of environmental preservation . However, the use
of criteria for selection of definitions and criteria
according to (McEldowney & Salter, 2016) is
essential in the policymaking process because
different definitions affect the contribution of Source: Panayotou (1993)
environmental taxes to total tax revenue. Many studies have been conducted to prove
In Indonesia, the explanation of article 43 the EKC hypothesis, to assist policymakers
paragraph (3) letter b of Law Number 32 of 2009 determine pro-growth or pro-environmental
concerning Environmental Protection and policies. If seen from its definition, environmental
Management (UU PPLH) shows the definition of tax is a pro-environmental policy. Susanti (2018)
environmental tax. concludes that with the 30 years of data (1986-
2015), the EKC hypothesis has not yet been
“what is meant by “environmental tax” proven in Indonesia. It means that Indonesia’s
is a levy by the central government and economic growth is still having an impact on the
local governments on every person who environmental damage in the research time
utilizes natural resources, such as the range. By looking at Susanti's research, it seems
tax on underground water extraction, that the Indonesian government needs to
the tax on fuel oil and the tax on implement policies that are pro-environment,
swallow’s nest” (Setneg, 2009b) such as environment taxes.
However, Alam, Murad, Noman, and Ozturk
The explanation regarding the word environmental (2016), who used a data set from The World
tax in Law 32/2009 appears to be narrower in Development Indicator (WDI) in the range of
scope than the definition on Eurostat (2013) or 1970 to 2012, found a different result. In
Markandya (2012), where they prefer to use the addition, Alam et al. (2016) found out that the
word “utilization of natural resources” rather than number of emissions will be lower in Brazil, China,
“environmental damage”. and Indonesia, so they recommend that the
policy implemented does not affect the revenue.
2.2. Hypothesis of Environmental Kuznet This result has been strengthened by the research
Curve (EKC) of Sugiawan and Managi (2016). They found that
The relationship between environmental the EKC U-turn is when Indonesia reaches 7.729
damage and economic growth has been the USD per capita revenue.

2.3. History of Environmental Tax

1
Some countries using green taxes Environmental tax is not a new tax. The idea
2 of this tax was firstly introduced in Denmark in
For example, the more pollutants an industry produces,
the greater the tax rate or the amount of taxes paid 1917 (Markandya, 2012), not long before Value
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Added Tax (PPN) was first introduced in the 1920s It adheres to the philosophy that as human
(Schenk, Thuronyi, & Cui, 2015). This kind of tax beings, we must respect all people and their
growth was initiated along with the rights. If a person leaves a residue of his
environmental movement/green movement in economic activities, he must pay other parties’
that same year (Markandya, 2012). Existing social costs.
literature mentions this type of tax, specifically OECD (2005) classified environmental tax as:
related to water pollution, was first implemented [1] energy tax3, [2] transportation tax4, [3]
in France in 1959 (McEldowney & Salter, 2016). In pollution tax5, and [4] resources tax6. In
1970, the OECD recommended the concept of imposition, it must be clear that it can be
“Polluter Pays” where those who dispose of the distinguished from the payment of rent or the
residues of their economic activities (pollutants) purchase of environmental services.
must pay to ensure that the environment is ideal. By taking into account the type of
After being first initiated in 1917 and environmental damage, environmental taxes can
recommended by the OECD in 1970, countries be categorized into several forms or categories,
worldwide began to adopt the concept of namely: [1] taxes on emissions or waste, [2] taxes
environmental taxes, such as Denmark, Sweden, on products, and [3] taxes on natural resources
Netherlands, and Norway (EEA, 1996). (Estevao, 2019).
The Netherlands is one of the countries in
the world that apply the environmental tax. 2.5. Polluter Pay Principle
Environmental taxes have been in place since On the polluter pay principle, there are
1972. The country has gradually adopted several several things to be concerned about. First, who
other types of taxes, such as the 1992 carbon tax, is the polluter? Polluters can be individuals or
the solid waste tax, the groundwater tax, the corporate on the production line and contribute
pesticide tax in 1995, the waste and fuel tax in to environmental pollution (Alder & Wilkinson,
2008, and the granting of incentives for low- 2016). The simplest example is when there is
emission vehicles from 2010 to 2015. The pollution due to a motorcycle, the owner or the
Netherlands is one of the countries that has motorcycle driver is the polluter. The problem
successfully implemented environmental taxes that arises whether the one who bears the
(Freestone & Hey, 1996). They have successfully environmental costs is always the polluter? Or is
decreased the national level of CO2 emissions by it entirely charged to the consumers in the form
1994 (EEA, 1996). of price in goods and services?
Unlike the United States, although it only What is paid by the polluter is a form of
implemented an environmental tax in the 1970s, responsibility by “paying” the cost of
in 1893, America had implemented tax incentives environmental prevention and management
for fossil fuels. It was not until 1970 that a tax on which is assessed or reflected by the output
gasoline was introduced, and in 1978 a tax on the and/or residue resulting from the production
use of gas was introduced. In this period, process. (Meyer, 2017). Then what is covered by
incentives for renewable energy were introduced the polluter? Polluter is responsible for the cost
to stimulate the industry to use non-fossil energy. of prevention of pollution and control measures
Since awareness of human dependence on the which measured by government authorities in the
environment has developed, along with the form of: [1] the cost of controlling the control
proliferation of sustainable economic movements system on environmental pollution, [2] license, or
in the 1980s (Kusumaningrum & Safitra, 2020). [3] monitoring of emissions (OECD, 1992)
The concept of “polluter pays'' applied to
international law in 1992, known as the Rio
Declaration. One of the Rio Declaration principles
3
is the internalization of environmental costs or This can be seen in the form of a gas levy that was
other economic instruments burdened to the applied in the UK in 1981 and it was revoked in 1998
polluter (OECD, 1992). (McEldowney & Salter, 2016) or VAT on fuel in
Indonesia.
4
For example, air freight charges in the UK
2.4. The Type of Environmental Tax (McEldowney & Salter, 2016) and VAT on flights in
In its application, there are several concepts Indonesia also apply.
of the form of environmental tax, [1] compulsory 5
Can take the form of carbon excise or plastic/waste
levies (the polluter pay principle), or [2] tax excise.
credit. The polluter pay principle concept was first 6
In Indonesia, it is in the form of non-tax revenue for
introduced in 1972 (Cordato, 2006; OECD, 1997). natural resource exploration and partly in the form of
PBB P5L Sector
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The next principle is that the fees paid by 2.7. The Challenges of Implementation
polluters are allocated to protecting the of Environmental Tax
environment. Thus, it is necessary to have clear The environmental taxes have several
regulation in state finances that provide signs for challenges. First, compliance issues. Referring to
the use of the budget. There are several types of the deterrence effect theory, tax rates, sanctions,
taxes In Indonesia that can be categorized as and the possibility to be audited influence tax
environmental taxes such as the OECD compliance (Allingham & Sandmo, 1972). This
classification, but it is still a homework to apply concept states that the right tariffs, harsh
this principle. This is because the government’s sanctions, and ideal monitoring mechanisms can
budget earmarking, both central and local, has improve compliance. However, this could be the
not been implemented optimally. opposite when it comes to environmental tax.
Fullerton et al. (2008) concluded that when the
2.6. The Advantages of Environmental tax policy on waste was implemented, the
Tax amount of waste entering landfills decreased
One of the advantages of the environmental dramatically but encouraged some to dispose of
tax is the existence of a new source of revenue. waste illegally. The volume of waste disposed of
Environmental taxes are triggered on individual may not be large, but illegal disposal causes
units of pollutants such as carbon or solid waste. uncontrollable damage. This action creates new
These two things are difficult to avoid nowadays social costs when compared to waste managed in
where industry and various tools are used daily landfills. (Fullerton et al., 2008).
still depend on fossil fuels and materials such as Second, the environmental tax will be an
plastic. However, this advantage is still debatable additional cost for the industry or in other words
because many researchers and policymakers view have a competitive effect (OECD, 1997). On the
environmental taxes as an excise, a policy tool to contrary, countries seek to accelerate economic
reduce economic activity’s negative externalities growth by attracting foreign investment and
(Fullerton et al., 2008; Markandya, 2012; Nellor, building industry/business in the country. In the
1995). carbon tax, an industry will prefer countries that
The next advantage of implementing the have concessions or even do not collect tax on
environmental tax is encouraging industrial carbon (Fullerton et al., 2008).
competition to develop environmentally friendly Third, Morley (2012), in his research on
technology. This is an incentive to the industry by Europe proved that the reduction of pollution is
not being taxed if the technology used does not due to the use of technology that suppresses
produce pollutants (Fischer, Parry, & Pizer, 2003; pollutants from existing industries. The
Fullerton et al., 2008; Markandya, 2012). imposition of environmental taxes, especially on
However, close supervision must accompany this energy use, does not significantly affect energy
advantage. If there is No. control, non- consumption even though it has a statistically
compliance leads to unmanageable damage. significant negative relationship to the volume of
In addition, some of the reasons for pollutants produced.
implementing environmental taxes include: [1] Fourth, environmental taxes are less
reducing environmental damage, and [2] suitable to apply in times of economic instability.
changing behavior (Nellor, 1995). Environmental Tariffs on environmental taxes will boomerang
problems occur when human activities generate compliance if inflation is high. This event implies
social costs that are higher than the benefits. This that not all countries are qualified to apply
occurs due to market failures (eg negative environmental taxes (Nellor, 1995). In addition,
externalities from an industry) or policy failures there is a potential for conflict between
(eg, subsidies on pesticides that cause pesticide environmental purposes and tax revenue.
use to increase). To offset the social costs of However, the trade-off of these two matters can
market or policy failures, the imposition of only be seen on a case by case basis.
environmental taxes as a regulatory tool is one of Fifth, justice is difficult to obtain in the
the recommended policy instruments by Nellor application of environmental taxes. People with
(1995). It is often considered to have a double less income tend to bear more costs, or in other
advantage, namely preventing the social costs of words, this type of tax is regressive (Wier, Birr-
environmental damage and reducing other social Pedersen, Jacobsen, & Klok, 2005), or there is a
tax rates (Fullerton, Leicester, & Smith, 2008). distribution impact (OECD, 1997). We can see
around us where the plastic diet movement is
being encouraged. Some small businesses have
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difficulty finding substitutions from packaging Indonesia started to arrange the

their products to packaging with environmentally environmental related policy through the
friendly materials without increasing production enactment of the Law No. 32 Year 2009 about the
costs. Or another example is where people with Environmental Protection and Management. This
economic capacity can more easily buy law aims to protect Indonesia from pollution and
environmentally friendly modes of environmental damage, guarantee the safety of
transportation, such as electric cars, than those human beings and all of the living things, control
who cannot. the use of natural resources wisely, promote
Furthermore, there are challenges in sustainable growth, and anticipate global
ratifying the regulations. The public generally environment issues. According to the law, there is
agrees more with this type of progressive tax so an economic instrument in the environment
that the application of regressive taxes is less sector. It can take in forms of incentives and
popular with policymakers (Lansley & Gowan, disincentives. Incentives can be in the form of tax
1994). There are ways to reduce environmental credit or tax facilities while disincentives can take
taxes’ regressiveness by providing exemptions or a form of implementation of taxes or sanction to
subsidies, but some groups such as retirees, the lawbreakers.
single parents, or unemployed (Casal, 2012). The environmental tax initiation begins with
The challenge that is commonly faced by the concept of "you pollute you pay", in which
countries that impose environmental taxes is that the subject is a business with an annual turnover
the taxes collected are not used for conservation of over Rp300 million. The tax object is natural
or environmental problems. Ideally, in the resource processing activities that produce
polluter pay principle, an ear-marking treatment residues, such as waste and pollution. The rate
simply means that a country’s income can be charged is 0.5% of the production cost (Pratiwi &
allocated specifically for particular interests and is Setyawan, 2014). However, this concept has yet
budgeted separately, either on a regional or to be determined. Even so, Government
national scale. (Porter & Walsh, 2006). Regulation Number 46 of 2017 (PP 46/2017) has
been issued, which deals with environmental tax
issues (Setneg, 2017) as a derivative of the PPLH
2.8. Tax and Excise
Law.
The different definitions between taxes,
The concept used in the imposition of
excise, and levies have essential implications in
environmental taxes in Indonesia is contained in
the formulation of environmental tax regulations.
article 2 letter j of the PPLH Law, which uses the
One of the considerations is who will manage it,
term polluter pays. The meaning of polluter
the central government or local governments
paying can be seen in the explanation of the PPLH
(Weier, 2006). There are many opinions about the
Law which reads:
definition of a tax. Weier (2006) provides
"What is meant by" the polluter pays
keywords for the definition of a tax, namely [1] is
principle "is that every person in charge whose
coercive, [2] increases state revenue, [3] is used
business and/or activity causes environmental
for the public interest, [4] does not receive
pollution and/or damage is obliged to bear the
feedback/services for payment, and [5] is not
cost of environmental restoration."
arbitrary.
PP 46/2017 regulates Environmental
Excise is imposed based on the rate imposed
Economic Instruments. Taxes (and environmental
on an item’s value or quantity (Weier, 2006),
charges) are mentioned as sources of funds for
charged on certain items (McCarten & Stotsky,
pollution and/or damage and environmental
1995). Goods that are worn generally have
restoration managed by the central government
several characteristics, such as [1] being a source
or local governments. The imposition of taxes,
of state revenue, [2] suppressing the impact of
levies or environmental subsidies is carried out in
negative externalities, [3] to improve. Both types
the form of imposition of central and local tax
of levies can be applied to the environmental tax
rates on parties who utilize resources based on
concept by taking into account their
the impact of environmental damage. On the
characteristics. If it is related to behavior, the
other hand, levies are imposed on local
terminology of excise can be used. governments’ services in the provision of
infrastructure for preventing pollution and/or
3. THE IMPLEMENTATION OF environmental damage. The last one is non-
ENVIRONMENTAL TAX energy subsidies, the implementation of which
3.1. Regulation of Environmental Tax in
Indonesia
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has an impact on environmental improvement environment. In addition, specifically for PPnBM,

over a certain period7. there is special treatment for motorized vehicles.
PP 46/2017 makes environmental taxes and Since 2013 through Government Regulation
levies as economic instruments in the goal of Number 41 of 2013 (PP 41/2013) concerning
environmental preservation by encouraging Luxury Taxable Goods in the Form of Motorized
environmental preservation, providing a Vehicles Subject to Sales Tax on Luxury Goods,
monetary boost to carry out economic activities vehicles with environmentally friendly technology
8
that have a good impact on the environment , or with the use of certain fuels are given an
impose a monetary burden to reduce economic incentive to reduce the Tax Basis (Dasar
9
activities that are bad for the environment . Pengenaan Pajak-DPP) to 75 % and 50%. Even
Economic activities subject to taxes / levies energy-efficient and affordable car types are
in Indonesia are listed in PP 46/2017, namely the subject to 0% DPP (Setneg, 2013). PP 41/2013
extraction / use of: [1] ground water, [2] surface was changed to be more pro-green with
water, [3] swallow's nest, [4] non-metals and Government Regulation Number PP 73 of 2019
rocks, [5] ] fuel for motor vehicles, [6] motorized (PP 73/2019), which regulates the amount of
vehicles, and [7] other activities that comply with PPnBM rates based on the amount of fuel use or
the environmental impact criteria. These other CO2 emission levels (Setneg, 2019).
activities accommodate activities that cause
resource depreciation (exploration),
3.2. Economic Instrument Related to
environmental pollution, and environmental
damage. Environmental
To determine the amount of tax, the tax
There are several economic instruments
base is used in the form of the weight or rate of
regulated in the PPLH Law as a means of
depreciation, pollution, or environmental damage
protecting the environment (Sugianto, Agustian,
regulated in other regulations. On the other
& Basti, 2020), among others:
hand, the amount of tariff for retribution
a. Tax and Environmental Subsidy
depends on the type, character, volume, and cost
This form is often known as environmental
of management facilities. PP 46/2017 also
tax terminology. Taxes are used as a disincentive
explains that the “carbon tax” has been
for the use of economic products or activities that
accommodated in section 6 of PP 46/2017
impact the environment. Examples of this type
concerning the Development of a Trading System
are the imposition of taxes on fuel, motor vehicle
for Waste and Emissions Disposal Permits.
taxes, and motor vehicle PPnBM. There are also
In PP 46/2017, it is said that the source of
incentives if the economic products or activities
funds related to disaster management and/or
carried out contribute to reducing environmental
environmental damage and restoration comes
damage, such as the use of environmentally
from the APBN and APBD. This is not according to
friendly technology in cars affecting the DPP from
the polluter pays concept because the funds in
PPnBM imposition or PBB incentives on
the APBN / APBD are obtained by all parties
greenhouse concept buildings.
including those not included in the polluter
b. Incentives in the Environment
category.
This incentive is given to those who have
In addition, the principle of ear-marking has
succeeded in reducing the amount of carbon or
not been applied in detail. In addition to the types
waste (pollutants). The concept applied is REDD +
of taxes mentioned in PP 46/2017 which are
(Reducing Emissions from Deforestation and
dominated by local taxes as stipulated in Law 38
Forest Degradation), where there will be efforts
of 2009 concerning Regional Taxes and Regional
to provide financial incentives to reduce
Retributions, there are several types of central
emissions as a result of forest destruction.
taxes that are borne by polluters, such as taxes on
(DITJENPPI, 2020).
products (VAT and Sales Tax on Luxury Goods -
c. Payment for Environmental Services
PPnBM) and Income Tax. However, these taxes
There is a fee for environmental services
are imposed on goods, services, or taxpayers in
related to waste management. An example of this
general and are not directly related to the
instrument is a tourism area levy, or certain local
government compensation to other local
governments that provide landfills.
7 d. Eco-Friendly Label in Goods and Services
This is an embodiment of Article 42 verse (2) of the
PPLH Law There are environmentally friendly product
8 branding on consumer products. This instrument
Providing subsidies
9
Imposing environmental taxes or levies has received less public attention in Indonesia.
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This behavior gives a signal that the company is 3.4. Environmental Tax in Indonesia Based
starting to put in place that the environment on Generally Applicable Principles
needs to be protected. A packaged beverage
product recently issued a product labeled "100% There are several generally accepted
recycled Indonesian First Bottle Innovation for environmental tax criteria as stated McEldowney
Cleaner Indonesia". and Salter (2016), Nellor (1995), dan OECD
(1992), among others: [1] taxes collected relating
3.3. Types of Taxes Related to the to government objectives related to the
Environment in Indonesia environment, [2] can change/encourage positive
individual behavior in an effort to preserve the
There are several types of taxes in environment, and [3] take the form of taxes on
Indonesia, both managed by the central emissions or waste (pollution), taxes on products,
government and local governments, which can be taxes on natural resources, taxes on energy, or
categorized as environmental taxes. Here are taxes on transportation. From several types of
some of these taxes: taxes that have existed in Indonesia, it can be
Tabel 1: Classification of Environmental Tax/Levies identified whether the types of taxes that exist
based on OECD Criteria are in accordance with generally accepted
criteria.
1 Types of Tax Implementation in Indonesia The first criterion is that tax revenues will
1 Energy Tax 1. Tax on Petrol* | be issued as expenses related to nature
Province/Regional Tax conservation activities. In general,
2 Transportatio 1. Tax on Vehicle* | environmentally related tax revenues go to
n Tax Province/Regional Tax central/regional government coffers and mix with
2. Tax on Vehicle other revenue sources. In this regard, the
Registration | Indonesian government has issued Government
Province/Regional Tax Regulation Number 77 of 2018 (PP 77/2018)
3. Sales Tax on Luxury concerning Management of Environmental Funds
Goods (PPnBM) on related to the management of environmental
Vehicle | Central
funds that are “rotated” and can be sourced from
Government Tax
environmental taxes (Setneg, 2018). However,
3 Pollution Tax* 1. Retribution for
when referring to PP 46/2017, the taxes in
garbage/cleaning
services10
question are mostly managed by local
2. Retribution for the governments. An in-depth study is needed
provision and/or suction whether these criteria have been applied.
of the latrine However, in the literature study, it was found
3. Retribution for that this criterion had been accommodated in
wastewater treatment existing regulations. Referring to PP 46/2017
4 Tax on Natural 1. Tax on Surface Water* | article 27 paragraph (2), it is mentioned that the
Resources Province/Regional Tax source of pollution countermeasures fund and/or
2. Tax on Minerals Non- the environmental damage can be taken from
Metallic and Rocks* | environmental taxes or levies.
Municipal/City Tax Furthermore, the criteria can
3. Tax on Groundwater* | change/encourage positive behavior. The types of
Municipal/City Tax taxes contained in PP 46/2017 or the rules on
4. Tax on Swallow’s Nest* | PPnBM provide additional costs for each product
Municipal/City Tax
or activity listed. Using the theory of supply and
Notes: * contained in PP 46/2017
demand, the imposition of taxes encourages
Source: OECD (1997), PP 46/2017, and PP 41/2013 last
modified with PP 73/2019 consumers to reduce their consumption of
taxable products. Undoubtedly, this criterion has
been met. Referring to PP 46/2017, it is
mentioned as incentives and disincentives in
article 3 letter c.
Finally, it takes the form of a tax on
10
The object of retribution for solid waste emissions/waste. This criterion is side by side
services/contribution is more likely [1] to provide with the class tax on pollution. If we look at table
garbage disposal facilities such as garbage collection, [2] 1 and the concept of REDD+, economic
removal of waste from the source, or [3] provision of a
waste disposal location (Setneg, 2009a)
instruments analogous to taxes on
ENVIRONMENTAL TAX: PRINCIPLES AND IMPLEMENTATION Jurnal Pajak dan Keuangan Negara Vol. II, No.2, (2021), Hal.23-33
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Dhian Adhetiya Safitra, Afif Hanifah P a g e | 30

pollutants/emissions are not reflected in existing to waste separation, classification of types of

instruments. Retribution is the cost incurred by waste that can enter landfills, and alternative
polluters to obtain pollutant disposal facilities, power plants energy from the waste burning
while REDD+ is more inclined towards providing process. Slovenia consistently uses funds
incentives. Studies related to taxes/excise on obtained from landfill tax to build a waste
carbon emissions or plastic waste illustrate that processing infrastructure that has succeeded in
Indonesia’s environmental tax criteria have not increasing recycled waste output and reducing
the amount of waste that goes to landfills
been fulfilled.
(Aleksic, 2013). In Indonesia, the application of
In addition to the criteria presented by
several types of taxes is categorized as
McEldowney and Salter (2016), other criteria
independent environmental taxes. For example,
need to be considered in the application of
waste retribution managed by local governments
environmental taxes. This criterion is
is not integrated between local governments. This
recommended by the ICC (1998), where the
policy causes no change in behavior in the
environmental tax determination must consider
community in terms of managing their waste.
[1] simple application; [2] generally accepted
globally; and [3] integrated with other
environmental policies. Simple is the criteria for 4. CONCLUSION
applying taxes in general. Given the principle that Sustainable development requires
no one is willing to pay taxes, the complexity of economic growth to consider environmental
paying gives an incentive for individuals to ignore sustainability. To achieve this balance, there are
the tax. In the end, the tax authority's energy will economic instruments that are used to change
dwell on the tax compliance issue only. human or corporate behavior. In its
The second criterion is needed so that there implementation, Indonesia already has a set of
will be no shifting of industries that produce regulations covering the enactment of
pollutants from one country that applies environmental taxes. Of the several
environmental taxes to other countries. In environmental tax criteria, taxes related to the
addition, its application is also for all types of environment in Indonesia have not met the three
industrial sectors. Each industry has a different environmental tax criteria submitted by several
resistance to accept additional costs in the researchers, namely [1] being paid by polluters to
production process. Consistency needs to be improve environmental conditions, [2]
applied to maintain competitiveness between influencing behavior, and [3] in the form of taxes
industries so that environmental taxes apply on pollutants. Several types of taxes that meet
globally. The application of PPnBM to motorized these three criteria do not currently apply in
vehicles adopts this principle. Vehicles that use Indonesia, such as taxes/excise on carbon and
fossil fuels that are more economical and/or plastics. In implementation in some countries, the
produce fewer air pollutants are given a smaller use of the term environmental tax can use the
tax basis. The same principle has been applied in term tax or excise. The usage of the term in
European countries. For example, for hybrid or Indonesia can be adjusted in the context of who
fuel cell electric vehicles, PPnBM is subject to 0% will manage this type of tax.
DPP. However, in Indonesia, PPnBM incentives This study still has limitations, such as using
for vehicles that are considered environmentally secondary data, no further information about
friendly do not make it as an environmental tax, how big Indonesia's environmental taxes are, and
considering that the PPnBM revenue for the only examining criteria with applicable
purchase of luxury vehicles is not allocated for implementation in Indonesia. Recommendations
environmental expenditures. for further research are to provide an overview of
Another criterion that needs to be the implementation of tax/excise on carbon
considered is that environmental tax should and/or plastics, which can provide
ideally be an element of all country’s integrated recommendations for regulating and/or
policies. Several countries in Europe have calculating the amount of tariffs that can be used
concluded that it is essential to integrate the as a basis for assessing the application of related
application of environmental taxes such as landfill taxes/excise in Indonesia as well as calculates the
tax with other environmental policies (Wardana environmental taxes potential.
& Safitra, 2020). Slovenia has successfully
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