Sugar tax conflict: Local industry claims Indonesian move not based on data

By Pearly Neo contact

- Last updated on GMT

The food and beverage industry in Indonesia has voiced disapproval over the government’s suggestion to tax sugar-sweetened beverages in the country, citing a lack of efficacy data and evidence. ©Getty Images
The food and beverage industry in Indonesia has voiced disapproval over the government’s suggestion to tax sugar-sweetened beverages in the country, citing a lack of efficacy data and evidence. ©Getty Images

Related tags: Indonesia, sugar tax

The food and beverage industry in Indonesia has voiced disapproval over the government’s suggestion to tax sugar-sweetened beverages in the country, citing a lack of efficacy data and evidence.

Indonesia has become the latest country in South East Asia to consider implementing a sugar tax, and if approved would be the sixth in Asia to do so behind Brunei, India, Malaysia, Philippines and Thailand.

The move was suggested by Indonesian Finance Minister Sri Mulyani Indrawati earlier this month in a meeting with legislators from the country’s House of Representatives (DPR), saying that this would help to reduce sugary drink consumption and thus levels of chronic diseases such as diabetes and obesity in the country.

The items targeted for taxation include RTD drinks with both sugar and/or artificial sweeteners as well as concentrated cordials.

“Non-manufactured items, exported products, honey products and vegetable juices with no added sugar will be exempted,” ​Sri Mulyani said.

“The method of payment should be upon product issuance from factories/ports/customs, [and] will be based on sugar and/or artificial sugar content].”

According to Kompas​, bottled tea would also be taxed at IDR1,500 (US$0.11) per litre due to its lesser sugar content, whereas carbonated drinks, energy drinks, concentrated coffee and so on would see an IDR2,500 (US$0.18) per litre levy.

“If this proposal is approved, the country could potentially receive IDR6.25tn (US$451.8mn) in revenue,”​ she said.

“That said, we cannot yet gauge the impact of this on inflation as it may hike up the costs of basic consumption products in the country.”

The Ministry of Industry is conducting an analysis of the potential impacts of this tax, involving both industry associations and local companies.

“What is certain, qualitatively, is that the rise in taxes will lead to a decline in demand as prices rise,”​ Acting Director of Beverages, Tobacco and Refreshments Supriadi told Antara​.

Industry response

Unexpectedly, the local food and beverage industry is not at all thrilled by this proposal, claiming a lack of scientific evidence to back up the efficacy of such taxes.

“[This will just] jack up prices and hurt people's purchasing power,”​ said Indonesian Food & Beverage Association (GAPMMI) Chairman Adhi Lukman.

"Basically, there is no data that shows applying excise will reduce the risk of non-communicable diseases and obesity, if that's the intention.”

Food Industry Asia Policy Director Steven Bartholomeusz added that chronic diseases are more of a ‘multi-factorial issue’, and encouraged policy interventions than came from a ‘positive incentives’ rather than ‘disincentives’ point-of-view.

“[Such incentives] should encourage product innovation and reformulation,”​ he said.

"[The] proposal has been put forward by the Finance Minister [but] it would need to be approved following a study requested to be carried out by the health ministry on the impact of sugar-sweetened beverages on public health.

“In a recent report on reformulation in Indonesia, it was found that nearly 90% of local consumers are happy for the industry to reformulate as long as the products are still tasty. Current reformulation priorities in Indonesia [already include] the reduction of sugar, [which is] also in line with the consumer trends in Indonesia.

"It would also be beneficial to look at data from a national nutrition survey to understand where Indonesian’s sugar consumption comes [to decide on the outcome]."

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