Tax Policy Reconstruction toward Implementation of Circular Economy in Indonesia †
- Analysis one (intervention) was conducted to perform a sequence of real situations obtained from the presence of three main keys with a role. The results of analysis one are shown in Table 1.
- Analysis two (social) was conducted to analyze the roles, norms, and values that apply to the context of the case being studied. The results of analysis two are shown in Table 2.
- Analysis three (political) was conducted to determine the disposition of power in a situation and how a process is carried out. The results of analysis three are shown in Table 3.
3. Results and Discussion
3.1. Current State of Indonesian Tax Policy
3.1.1. Tax on Green Economy
- Income Tax
- Exemption for the import of goods for nature conservation purposes (PMK No. 34/PMK.010/2017).
- Corporate Income Tax Article 25 for domestic corporate taxpayers who invest in certain business fields and certain regions (PP No. 9 of 2016): (i) Reduction in net income by 30% of the total investment in the form of tangible fixed assets, including land which is used for main business activities, is charged for 6 years each at 5% per annum, which is calculated from the time of commercial production. (ii) Accelerated depreciation of tangible assets and accelerated amortization of intangible assets.
- Income Tax Article 4 paragraph (2) Final; a rate of 0.5% of turnover for entrepreneurs whose gross turnover (turnover) is not more than 4.8 billion IDR in one tax year (PP No. 23/2018)
- VAT and PPnBM
- Exempt from importing goods for nature conservation purposes (PMK No.196/PMK.010/2016);
- Exempt for the import of certain strategic taxable goods (machinery and factory equipment) (PP No. 81/2015);
- Exempt for delivery of certain strategic taxable goods (machinery and factory equipment) (PP No. 81/2015);
- Exempt from supplying electricity, except for houses with data above 6600 voltage amperes (PP No. 81/2015);
- The basis for imposition of PPnBM tax on taxable goods of 0% of the selling price for motorized vehicles which are included in the energy-efficient and affordable car program, other than sedans or station wagons (PMK No.64/PMK.011/2014).
- Import Duty
- Exempt for the import of goods for nature conservation purposes (PMK No.196/PMK.010/2016);
- Exempt for import with an import period of 2 years as of the entry into force of the decision on exemption from import duty (PMK No.188/PMK.010/2015), on (i) machinery for industrial development, and (ii) materials and goods of companies that have completed industrial development, except industries that produce services, as long as they add at least 30% of installed capacity, for additional production purposes for a maximum of 2 years;
- Exempt from importing goods and materials for additional production purposes for 2 years according to installed capacity with an import period of 2 years from the date of entry into force of the decision on exemption from import duty (PMK No.188/PMK.010/2015), on (i) companies that carry out development, except for industries that produce services using imported production machines purchased domestically, (ii) companies that carry out development, except for industries that produce services using imported production machines purchased domestically, as long as they add at least 30% of installed capacity, and (iii) companies that obtain import duty exemption facilities, but have not realized all of their imports within a period of 2 years, which may be granted an extension of the importation period for 1 year as of the expiration date of the import duty exemption facility.
- Carbon Tax
3.1.2. The Inhibiting Factors and Weaknesses of Tax Policy Instruments
3.2. Tax Policy Reconstruction Proposal for the Implementation of a Circular Economy in Indonesia
Institutional Review Board Statement
Informed Consent Statement
Data Availability Statement
Conflicts of Interest
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|Parties||Definition||Parties in Research|
|Client (C)||The Individual, group, or entity that causes intervention in the situation||Goverment|
|Practitioner (P)||Individuals or groups conducting research using the SSM Method||SSM Researcher and Advisor|
|Owner (O)||The parties who act as the owner of the issue. Can be entities or individuals who have an interest in or are affected by efforts to inmprove problematic situations.|
|Practitioner (P)||SSM Reseacher and Advisor||Knowing more about the reality of the object under study|
|Government||The Government has the power to decide tax policies related to the implementation of a circular economy|
|Industry Players||Industry players have the capital power to support/not support tax policies from the government for the implementation of a circular economy|
|General Public||The community has the power to support/not support tax policies from the government for the implementation of a circular economy|
|Activity||What Happens in the Real World|
|Government reconstructs tax policy|
|Industry players implement a circular economy||Industry players do not yet have a business plan for the transformation to industrial application based on a circular economy|
|The general public wants a better/healthy environment quality and the creation of new jobs||The general public is still not fully able to change their consumptive lifestyle and produce large amounts of waste|
|Current Tax Policy||Propose Tax Policy Toward Circular Economic Implementation|
|1. Progressive Income Tax on labour income from 5–35%||1. Reduce Progressive Income Tax on labour income|
|2. Varies tax rate raw material (Central Tax and Local Tax). No difference between the renewable resource compare to non-renewable resource||2. Tax policy which make differentiation between the renewable resource compare to non-renewable resource|
|3. Same VAT rate for product sole. No difference between the product use re-cycled material compare to non re-cycle material||3. Tax relief/tax rate reduction for the product sold use re-cycled material|
|4. Carbon Tax for CO2 waste||4. Progressive Tax on every waste impose to industry with high waste|
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Lestari, E.R. Tax Policy Reconstruction toward Implementation of Circular Economy in Indonesia. Proceedings 2022, 83, 68. https://doi.org/10.3390/proceedings2022083068
Lestari ER. Tax Policy Reconstruction toward Implementation of Circular Economy in Indonesia. Proceedings. 2022; 83(1):68. https://doi.org/10.3390/proceedings2022083068Chicago/Turabian Style
Lestari, Ekawati Rini. 2022. "Tax Policy Reconstruction toward Implementation of Circular Economy in Indonesia" Proceedings 83, no. 1: 68. https://doi.org/10.3390/proceedings2022083068