Why Industry Is Pushing Back Against Indonesia’s Diaper Tax Proposal
In a move that has sparked debate, the Indonesian government is considering a tax on disposable diapers and wet wipes, prompting a strong response from the industry. The Indonesian Pulp and Paper Association (APKI) has urged the government to reconsider this plan, warning of potential negative consequences for both industry players and consumers.
The proposed tax, according to APKI Chair Liana Bratasida, could significantly impact industrial competitiveness and public purchasing power. She emphasizes the diaper industry’s crucial role in the national pulp and paper supply chain, contributing 3.92% to non-oil and gas GDP and generating over $8 billion in export earnings in 2024. Indonesia currently boasts 17 diaper factories with a combined capacity of 17.90 billion pieces, with production reaching 16.47 billion pieces in 2023 and a projected national demand of 13.1 billion pieces in 2024.
Liana highlights the challenges faced by the industry, including high production costs and market competition, which have led to the closure of several factories. She warns that an additional tax burden could result in price increases and a further decline in supply.
The government’s rationale for the tax is environmental, aiming to reduce marine waste as outlined in Government Regulation No. 83/2018. Diapers, identified as the second-largest contributor to marine pollution in 2017 (accounting for 21% of waste), have low recycling rates due to complex synthetic materials. However, Liana counters that poor waste management, not the product’s nature, is the primary cause of the large volume of diaper waste in the ocean.
She also points out successful collaborations between the diaper industry and cement producers, who use diaper waste as a substitute for biomass energy, aligning with circular economy principles. APKI argues that diapers are not solely plastic products but contain a mix of materials, including pulp, SAP, PE film, nonwoven PP, latex or spandex, and rubber-based adhesives. Many of these plastic components are already subject to the government’s planned plastic tax, and an additional diaper tax could create a double tax, eroding domestic competitiveness.
Furthermore, APKI notes that adult diapers are classified as medical devices under the Health Ministry’s licensing system. Liana warns that a new tax could undermine efforts to boost domestic medical device production. She emphasizes the need for policy balance, considering environmental, industrial, and public interests.
APKI has committed to supporting the government in drafting targeted, effective, and fair regulations, urging the government to reassess the plan based on broader industrial conditions and public needs. Finance Minister Purbaya Yudhi Sadewa has previously stated that no new taxes will be introduced until Indonesia’s economic growth reaches 6%, including those on diapers and wet wipes.
The proposal emerged following the issuance of Finance Minister Regulation No. 70/2025, which outlines the Ministry of Finance’s 2025-2029 strategic plan. The regulation suggests potential expansions of taxable goods, including diapers, disposable tableware, and wet wipes, as part of broader revenue-increasing efforts. However, Purbaya has indicated that the plan will not be implemented in the near future, pending economic stabilization.