Indonesia plans to implement a sugar-sweetened beverage (SSB) tax.
Just like tobacco products, this tax is also related to people in Indonesia’s health condition. With approximately 10% of Indonesia’s adult Population classified as obese and a notable increase in diabetes prevalence, the tax serves as a critical measure to address these health concerns [1].
Hence, given the detrimental effects of excessive consumption of sugary drink products, it is necessary to implement measures to control intake through taxation [2].
The plan to implement the sugar-sweetened beverage (SSB) tax as part of the 2025 State Revenue and Expenditure Budget (RAPBN) is still under discussion with the House of Representatives (DPR). The Government aims to develop a framework that ensures the objectives of this tax are met, specifically to improve public consumption patterns related to sugar [3].
Impact on Consumer Behavior
The introduction of taxes will increase the cost of producing sweetened beverages. Producers may respond in various ways, including raising retail prices, maintaining current prices while reducing packaging volume, or sacrificing profit margins to maintain their market share.
In the initial implementation phase, there is potential for consumer adjustment, which could lead to decreased revenues. Companies that rely heavily on sweetened beverages for their income will likely be affected significantly. However, the impact may be temporary, as the Indonesian Population is still intensely interested in sweet drinks [4].
Economic Implications
Implementing taxes on sugar-sweetened beverages (S.S.B.s) might lead to higher prices.
A systematic review and meta-analysis of SSB taxes globally indicated that consumers react to economic measures; the findings revealed a correlation between SSB taxes and increased prices for the taxed drinks, along with decreased sales [5].
The SSB tax also has mixed implications for the beverage industry. While companies that produce sugary drinks may experience a decline in sales, healthier beverage options have the potential to grow.
The tax on sugar-sweetened beverages can incentivize the industry to reformulate its products. When the tax policy is structured with specific rates targeting the amount or volume of sugar in the products, it encourages changes in sugar composition. As the tax increases with higher sugar content, producers can mitigate their tax burden by reducing the sugar levels in their beverages [6].
Challenges and Criticisms
Despite its potential benefits, the S.S.B. tax has faced criticism from various stakeholders. Beverage manufacturers argue that the tax disproportionately impacts low-income families who may rely on affordable sugary drinks. Addressing these equity concerns is vital for ensuring the tax is effective and does not widen existing health disparities [7]. Additionally, there are concerns about enforcement and compliance among smaller retailers.
Kemenperin stated that the preliminary analysis regarding price elasticity if the Government imposes a tax on packaged sugary drinks and the impact on the industry, especially on small and medium-sized enterprises (SMEs), is quite significant. If a tax of Rp1,771 per liter is implemented, the potential increase in product prices could reach 6-15 percent. 60-70 percent of beverage sales occur through traditional market channels, such as small vendors and local shops [8].
All in all, the sugar-sweetened beverage tax in Indonesia represents a significant public health initiative aimed at reducing sugar consumption and improving health outcomes in a country facing rising rates of obesity and diabetes.
While the tax has the potential to generate revenue for essential health programs and encourage manufacturers to reformulate their products, it also poses challenges, particularly for low-income families and small businesses. Addressing these equity issues and ensuring effective implementation will be crucial for the tax’s success. As Indonesia navigates this new policy, ongoing assessment and stakeholder engagement will be vital to balancing public health goals with economic realities.
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Sources:
[1] World Health Organization. (2022). Global Health Observatory: Non-Communicable Diseases Data.
[5] Andreyeva T, Marple K, Marinello S, Moore TE, Powell LM. Outcomes Following Taxation of Sugar-Sweetened Beverages: A Systematic Review and Meta-analysis. J.A.M.A. Netw Open. 2022;5(6):e2215276. doi:10.1001/jamanetworkopen.2022.15276
[6] https://ortax.org/dampak-pengenaan-pajak-minuman-berpemanis
[7] Thow, A. M., et al. (2018). The impact of fiscal policy on nutrition: A systematic review. International Journal of Public Health.
