In brief

The Carbon Tax was introduced in Law No. 7/2021 on Harmonization of Tax Regulation. The Carbon Tax will be imposed on carbon emissions that have a negative impact on the environment. The law stated that the Carbon Tax would be applied starting on 1 April 2022 for coal fired power plants. The law requires an implementing regulation in the form of a Minister of Finance regulation to stipulate the tariff and basis of the Carbon Tax, and a government regulation to stipulate the tax subject and tax object. There has to be consultation on the regulations with the Indonesian parliament.

According to the information available in the online media yesterday, the Indonesian Government has now decided to postpone the implementation of the Carbon Tax. The Minister of Finance stated that a coordination is required to synchronize with the carbon market roadmap. The Minister also said that the implementation of the Carbon Tax is quite complex, and the Carbon Tax rate is different for each country.

Earlier this week, the Head of the Fiscal Policy Agency stated that the Carbon Tax is likely to be implemented in July 2022. The Fiscal Policy Agency is currently preparing the implementing regulation.

Actions to consider

The Carbon Tax will only be effective when the implementing regulations are issued, so do keep an eye out for updates on this. The full impact of the Carbon Tax on your business won’t be known until the implementing regulations are issued.

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