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🇮🇩 Indonesia /Economy & Trade

Celios: Windfall Tax Could Boost State Revenue by Trillions Annually

From Tempo · (19m ago) Indonesian

Translated from Indonesian, summarized and contextualized by DistantNews.

TLDR

  • A tax on unexpected profits from extractive companies, known as a windfall tax, could generate trillions of rupiah annually for Indonesia, according to the Center of Economic and Law Studies (Celios).
  • Celios researcher Jaya Darmawan stated that the government currently holds back on implementing this tax, which is levied on companies experiencing unforeseen gains due to global commodity price surges.
  • Darmawan cited examples from the UK, Italy, and India where windfall taxes are applied, suggesting potential annual revenues of Rp66 trillion from coal and Rp14 trillion from nickel if implemented in Indonesia.

The Center of Economic and Law Studies (Celios) has highlighted a significant, yet untapped, revenue stream for the Indonesian state: a windfall tax on extractive companies. This proposal, which could potentially bring in trillions of rupiah annually, underscores a missed opportunity for bolstering national finances, especially amidst current fiscal pressures.

Berita buruknya, itu di-hold sama pemerintah sekarang.

— Jaya DarmawanCelios researcher Jaya Darmawan stated that the government is currently holding back on implementing the windfall tax.

Celios researcher Jaya Darmawan explained that a windfall tax is not a punitive measure on good business performance, but rather a mechanism to capture unexpected profits arising from external factors, such as global geopolitical dynamics affecting commodity prices. This aligns with international practices, as seen in countries like the United Kingdom, Italy, and India, which have successfully implemented similar taxes to stabilize their economies and support their populations.

Ketika terjadi kenaikan laba bersih yang tidak diduga, juga harus diambil oleh negara. Jadi tidak double taxation.

— Jaya DarmawanJaya Darmawan explained that a windfall tax is levied on unexpected profit increases and does not constitute double taxation.

The potential revenue is substantial. Celios estimates that a 25% windfall tax on coal exports, combined with an assumed exchange rate, could yield Rp66 trillion per year. Furthermore, a 10% tax on nickel production not directly linked to electric vehicle or energy transition projects could generate an additional Rp14 trillion annually. These figures represent a considerable fiscal resource that could be directed towards national development and economic stability.

Inggris memanfaatkan penerimaan pajak tersebut untuk menstabilkan fiskal dari sisi defisit dan mensubsidi masyarakat miskin.

— Jaya DarmawanJaya Darmawan cited the UK's use of windfall tax revenue to stabilize fiscal deficits and subsidize the poor.

Beyond the windfall tax, Celios also advocates for a tax on Indonesia's wealthiest individuals, particularly those whose fortunes are tied to the extractive sector. A modest 2% tax on the top 50 richest Indonesians, who collectively hold trillions of rupiah, could generate another Rp93 trillion per year. This dual approach—taxing unexpected corporate profits and significant personal wealth—offers a comprehensive strategy for enhancing state revenue and promoting a more equitable distribution of economic gains within the nation.

Dengan potensi produksi sekitar 2,2 juta ton per tahun, Jaya memperkirakan sekitar 1,8 juta ton atau mayoritasnya belum dilakukan penghiliran.

— Jaya DarmawanJaya Darmawan estimated that out of 2.2 million tons of annual nickel production, about 1.8 million tons are not yet processed, making them eligible for windfall tax.
DistantNews Editorial

Originally published by Tempo in Indonesian. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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