Economist: EV Tax Exemption Instruction Increasingly Burdens Regions

Executive Director of the Center of Reform on Economics (CORE) Indonesia, Mohammad Faisal, stated that the Interior Minister’s instruction to governors to provide incentives in the form of tax exemptions for electric vehicles (EV) poses serious challenges at the regional level. Faisal noted that the policy aims to continue the government’s push to develop the electric vehicle ecosystem through incentives. “This is actually intended to encourage the policy that has been implemented so far to provide incentives for electric vehicle development. But due to budget limitations, the incentive is now expected to be provided by regional governments as well,” Faisal said when contacted by Republika in Jakarta on Friday (24/4/2026). According to Faisal, the policy indicates a shift in the incentive burden from the central government to regional governments. Faisal suspects that the government wants to reduce the central burden in supporting the electric vehicle industry. “So it is passed on to regional governments in the form of exemptions, for example, for vehicle ownership transfers or motor vehicle taxes,” Faisal continued. Faisal assessed that the implementation of this policy is inappropriate because it coincides with cuts to transfers to regions (TKD) by the central government. He said that the TKD cuts are making regional fiscal space increasingly thin.