Indonesia’s Directorate General of Customs and Excise (Bea Cukai) has confirmed its intention to implement an excise tax on packaged sweetened beverages (MBDK) starting next year. This move, while aimed at promoting public health, has sparked concerns within the food and beverage industry about its potential impact on businesses and employment.

What is Bea Cukai?

In Indonesia, “Bea Cukai” refers to the Directorate General of Customs and Excise, which is a government agency responsible for collecting taxes and duties on imported and exported goods, as well as overseeing the flow of goods in and out of the country.

Regulatory Framework

The legal basis for this new tax lies in Article 4, paragraph 2 of Law No. 7/2021 on the Harmonization of Tax Regulations (UU HPP), which allows for the addition of excise-taxable goods to be stipulated in the Draft State Budget (RAPBN).  The 2025 RAPBN, recently submitted to the House of Representatives, includes MBDK among the four categories of goods subject to excise tax.

“As mandated by the UU HPP, packaged sweetened beverages will become excise-taxable goods as regulated by the State Budget Law,” Nirwala Dwi Heryanto, Director of Communications and User Guidance at the Customs and Excise office, clarified to Bisnis on Monday, August 26th. He added that the implementation of this excise tax will necessitate a Government Regulation.

APINDO: Highlight Revenue Projections and Industry Impact

While the government has yet to disclose specific revenue targets from the MBDK excise tax for 2025, discussions between the executive and legislative branches are ongoing. The 2025 RAPBN Financial Notes state that policymakers plan to achieve excise revenue growth through policy expansion, which includes introducing the MBDK excise tax “to safeguard public health.”

The Indonesian Employers Association (APINDO) has expressed concerns about the potential “multiplier effect” of this tax on businesses. APINDO’s Chairperson, Shinta W. Kamdani, warned that the increased excise tax could lead to higher product prices, potentially dampening consumer purchasing power and resulting in job cuts.

While acknowledging the government’s good intentions, APINDO emphasizes that setting a maximum limit on added sugar in processed foods doesn’t automatically translate to reduced health risks.

They urge for further research and advocate for greater industry involvement in formulating and implementing regulations.

The food and beverage sector contributes significantly to Indonesia’s economy, accounting for approximately 39% of the non-oil and gas industrial GDP and 6.55% of the national GDP.

Delayed Regulation is Set to Effective in 2025

Although the government had targeted excise revenue from plastic products and MBDK for 2024, as stipulated in Presidential Regulation No. 76/2023, they have delayed the implementation.

Nirwala explained that the government is exercising caution in classifying goods as excise-taxable, taking into account various factors, including the economic conditions of the population, the national economy, industry considerations, and health and environmental aspects.

“The government is very prudent and thoroughly considers various aspects,” Nirwala stated in a press release on Wednesday, July 24th. “We will listen to the aspirations of stakeholders, including the House of Representatives and the wider community.”

While the government has opted to postpone the implementation of excise taxes on plastic and tobacco products in the 2025 RAPBN, it remains committed to introducing the MBDK excise tax as a public health measure. The 2025 Budget Financial Note explicitly states that the limited expansion of excise objects will focus on MBDK.

Stay Informed with Lets Move Indonesia

As Indonesia prepares to introduce an excise tax on sweetened beverages in 2025, the government faces the challenge of balancing public health concerns with the potential impact on the food and beverage industry.

In the coming months, further discussions and deliberations will likely be held as stakeholders navigate this complex issue.

Lets Move Indonesia is committed to keeping you updated on the latest developments in Indonesia’s business and tax environment. As the MBDK excise tax takes shape, we will continue to provide insights and analysis to help businesses navigate this evolving landscape.

Disclaimer: This article provides a general overview of the upcoming MBDK excise tax in Indonesia. For specific advice on how this tax may impact your business, consult with a qualified tax and legal professional.