Fiscal Policies: A key tool to achieve Indonesia’s land use goals?

The document argues that Indonesia's current fiscal policies in the land use sector—including forestry, oil and gas, mining, and agriculture—incentivize land expansion over productivity, contributing to deforestation and emissions. It proposes three primary areas for reform: shifting revenue collection from production-based to land-size based levies, increasing tax revenue sharing for local governments to discourage land clearing, and earmarking Adjustment Funds for sustainable land use programs. A case study on the palm oil sector highlights a low tax-to-GDP ratio of approximately 3.4% and limited revenue redistribution to local governments, illustrating the potential for fiscal optimization.

• Indonesia's land use sector is a primary driver of emissions and deforestation, yet its tax-to-GDP ratio in agriculture is only 1.2%, which is significantly lower than the national average of 12%.
• Current revenue collection is heavily skewed toward production-based levies rather than land-size based levies, with 93.5% of land use revenue (IDR 400 trillion) derived from taxing profitability, which removes incentives for producers to use land efficiently.
• Existing revenue transfer mechanisms may encourage local governments to support the expansion of agricultural lands and extractive industries because certain sectors, such as forestry and mining, provide large percentages of regional revenue, while plantation sector revenues are largely retained by the central government.
• The Adjustment Funds increased from IDR 20 trillion in 2010 to IDR 56 trillion in 2011, but none of these funds are currently used to support sustainable land use management programs.
• In the palm oil sector, which contributed at least IDR 10 trillion (USD 1 billion) to national tax revenues in 2012/2013, the tax-to-GDP ratio is relatively low at around 3.4%, and only 11-14% (IDR 1,103 billion/USD 106 million) of revenue was redistributed to local governments during that period.

APA

Climate Policy Initiative (n.d.). Fiscal Policies: A key tool to achieve Indonesia’s land use goals? https://www.climatepolicyinitiative.org/wp-content/uploads/2015/12/Fact-Sheet-English-Fiscal-Policies-A-key-tool-to-achieve-indonesias-land-use-goals.pdf

Chicago

Climate Policy Initiative. Fiscal Policies: A key tool to achieve Indonesia’s land use goals? n.d. https://www.climatepolicyinitiative.org/wp-content/uploads/2015/12/Fact-Sheet-English-Fiscal-Policies-A-key-tool-to-achieve-indonesias-land-use-goals.pdf.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=Fiscal Policies: A key tool to achieve Indonesia’s land use goals? |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2015/12/Fact-Sheet-English-Fiscal-Policies-A-key-tool-to-achieve-indonesias-land-use-goals.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiativendfiscal, author = {{Climate Policy Initiative}}, title = {{Fiscal Policies: A key tool to achieve Indonesia’s land use goals?}}, institution = {Climate Policy Initiative}, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2015/12/Fact-Sheet-English-Fiscal-Policies-A-key-tool-to-achieve-indonesias-land-use-goals.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }