The government’s renewed commitment to impose excise tax on sugar-sweetened beverages (SSBs) this year has sparked concern and resistance from industry players as the policy could severely affect an already weakened sector and miss its public health target.

During a budget hearing with the House of Representatives’ Finance Commission XI on August 28, 2024, Finance Minister Sri Mulyani Indrawati reaffirmed the government’s plan to introduce the excise on bottled sweetened beverages, citing a sharp increase in diabetes prevalence, even among children, as the primary health concern behind the move.

“Diabetes is the mother of all diseases, and its increasing incidence, even in children, makes this [excise] policy important,” Sri Mulyani said, adding that the measure is aligned with the Ministry of Health’s preventive agenda.

However, the Indonesian Soft Drink Industry Association (ASRIM) has raised red flags over the timing and rationale of the policy. Triyono Prijosoesilo, Chairman of ASRIM, warned that the excise could exacerbate the challenges already facing the beverage sector amid sluggish economic conditions.

“Indonesia's economy is under pressure, and our industry recorded a contraction in the first quarter. Introducing additional burdens, such as excise, at this point could hamper recovery further,” Triyono said on Wednesday, May 14, 2025.

He also questioned the scientific basis of targeting ready-to-drink beverages.

“According to 2015 data, only 0.5 percent of Indonesians’ calorie intake comes from these drinks. Most sugar consumption actually comes from unprocessed foods,” he cited.

The Ministry of Industry, which oversees beverage manufacturing, has called for more inclusive consultations and clear transition period for businesses to adapt.

“We have yet to receive an invitation to discuss the policy’s substance. From the industry’s perspective, this excise will directly impact selling prices and potentially reduce consumer access,” Merrijantij Punguan Pintaria, Director of the Beverage and Tobacco Industry at the Ministry of Industry, said.

She acknowledged that the industry had begun offering healthier alternatives but emphasized that consumer preference still leaned toward regular sugary beverages.

“What we need now is a strong education campaign. Changing consumer behavior is a long-term effort that cannot rely solely on pricing strategies,” she said.

Merrijantij added that any policy should come with a realistic timeline. “Give the industry time to adapt, innovate, and comply. Abrupt implementation will harm business continuity.”

Meanwhile, Economist and Executive Director of CORE Indonesia, Mohammad Faisal, questioned the effectiveness and clarity of the policy's objectives.

“Is this excise for public health or state revenue? If it's for health, we should learn from tobacco excise,” he said. “Despite higher tobacco taxes, smoking remains rampant due to addiction. Soft drinks don’t carry the same addictive qualities, but sugar intake simply shifts elsewhere, like through sweetened tea or rice.”

Faisal warned that the policy could become a triple burden: “Consumers are hit, industries bleed, and the broader economy takes a blow. Timing is crucial, and now might not be the right moment.”

Policy background

The idea of taxing sugar-sweetened beverages has circulated for years but gained traction after studies showed a rising trend in non-communicable diseases such as diabetes and obesity. The government sees the excise as both a health intervention and a potential revenue source amid a narrowing fiscal space.

While discussions with House Commission XI are ongoing, stakeholders from industry, academia, and civil society are urging the government to ensure that the policy is based on comprehensive data and implemented with due care.

“There must be a balance between fiscal needs, public health goals, and industrial sustainability,” Triyono said.