Jakarta's 10 Percent Fuel Tax Hike May Trigger Social Issues: Observer

TEMPO.CO, Jakarta - Automotive observer Yannes Martinus Pasaribu said that the 10-percent increase in vehicle fuel tax in Jakarta would trigger social problems without the availability of affordable alternatives.

Yannes said that one of the immediate impacts of the increase in motor vehicle fuel tax is the rising cost of operating conventional or ICE vehicles, which will affect all motor vehicle users—from private vehicle owners, public transportation users, to logistics service businesses.

"This may have an impact on the price of public transportation services and the cost of shipping goods. Then, it could contribute to general inflation, considering that fuel is an important component in various economic activities in Indonesia today," he told Tempo on Tuesday, January 30.

The Jakarta Provincial Government officially doubled the vehicle tax rate to 10 percent. The policy is set forth in Provincial Regulation No.1/2024 on Regional Taxes and Regional Retributions signed by acting governor Heru Budi Hartono on January 5.

Overall, Yannes said, the increase in fuel tax rates will likely have an impact on vehicle purchasing decisions. Especially in changing consumer preferences towards more energy efficient types of vehicles such as electric cars and motorbikes.

Yannes said that raising fuel taxes could be a correct policy if the goal is to encourage environmental sustainability and the use of clean energy. However, its effectiveness depends on the availability of affordable alternatives, such as EVs and efficient public transportation. Without these alternatives, the policy of increasing fuel tax rates will become a social problem.

"A hike in fuel tax to encourage the adoption of electric vehicles must be coupled with efforts to increase the availability of affordable alternatives."

He emphasized that the Jakarta government has to make sure that the policy will not burden low-income social groups. In addition, the policy must also be part of a broader environmental strategy, with appropriate social and economic support for those affected.

ANNISA FEBIOLA

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