IESR: New Tax Rules Could Hinder Acceleration of Electric Vehicles

The Institute for Essential Services Reform (IESR) assesses that the tax provisions in the Minister of Home Affairs Regulation (Permendagri) No. 11 of 2026 on Motor Vehicle Tax could hinder the acceleration of the national implementation of electric vehicles (EVs). IESR Chief Executive Officer Fabby Tumiwa stated that the shift from a mandatory 0% tax to policies dependent on individual regions risks disrupting the development of the national electric vehicle market. According to him, this policy change could impede the national electric vehicle acceleration, even though the Indonesian government’s targets are to reach 2 million electric cars and 13 million electric motorcycles by 2030, potentially saving import foreign exchange up to Rp49 trillion and cutting fuel subsidies by Rp18.3 trillion per year. “National tax incentives must be retained and even expanded. The change from a mandatory 0% tax to rates dependent on the fiscal preferences of each governor will destroy the price parity that is greatly needed for mass adoption,” Fabby said in his statement in Jakarta on Friday. Additionally, according to him, Permendagri 11/2026 needs to be aligned with Law No. 1 of 2022 on Financial Relations between the Central Government and Regional Governments (UU HKPD). That regulation, he added, previously provided policy direction by excluding renewable energy-based vehicles from taxable objects. Fabby mentioned that Article 7 of UU HKPD has provided a very progressive policy direction by excluding renewable energy-based vehicles from taxable objects. Regarding this, IESR calls on the government, particularly the Ministry of Home Affairs, to postpone the implementation of provisions related to electric vehicles, harmonise regulations, and provide permanent fiscal guarantees for the electric vehicle sector towards the 2030 targets. “We cannot achieve industrial decarbonisation and the cessation of fuel imports if the rules of the game change every two years,” he said. According to him, if the regulation is not revised soon, it will be highly vulnerable to material judicial review in the Supreme Court, which would only worsen consumer and investor confidence.