Law No. 7 on the Harmonisation of Tax Regulations

Law No. 7 on the Harmonisation of Tax Regulations contains provisions on the carbon pricing instruments in Indonesia, including a carbon tax. Article 13 stipulates that Indonesia’s carbon tax has been introduced to control greenhouse gas (GHG) emissions and to support the achievement of the emissions reduction targets outlined in Indonesia’s NDC. To support the implementation of the carbon tax, a carbon tax roadmap will be produced, containing an emissions reduction strategy that reiterates Indonesia’s commitment to achieving net zero GHG emissions by 2060, will identify priority sectors for taxation (such as the forestry sector which accounts for 97% of Indonesia’s NDC emissions reduction target) and identify sectoral targets. Article 13 further outlines the timescales along which this carbon tax will be implemented and outlines plans for expanding carbon pricing in the future. The Law states that the carbon tax rate will be made higher than or equal to the domestic carbon price.