Legal Expert Highlights Local Governments' Plan to Impose Surface Water Tax

Plans by local governments (pemda) to impose a Surface Water Tax (PAP) of Rp 1,700 per palm tree per month have drawn scrutiny. Forestry law expert from Al-Azhar Indonesia University, Dr. Sadino, stated that the policy needs to be re-examined to avoid conflicting with the philosophy of taxation or applicable legal rules.

Sadino explained that the basic concept of PAP is not imposed on plants, but on the actual activity of taking or utilising surface water. The philosophy of PAP is directed at the taking or utilisation of surface water, so its application must be very careful because it directly impacts business actors.

“Regional regulations, governor regulations, or draft regional regulations related to PAP that are currently in process need to be reviewed,” Sadino said in a press statement in Jakarta on Wednesday (22/4/2026). Several regions plan to implement PAP, including the Riau Provincial Government, West Sumatra, and Bengkulu.

They are implementing PAP following a decline in transfer funds from the central government. For example, the West Sumatra Provincial Government is targeting revenue of Rp 1 trillion in 2026 with a collection target of Rp 594 billion, initially focusing on non-smallholder palm plantations. The plan has sparked protests from palm oil business groups.

Sadino conveyed that legally, local governments cannot freely determine tax objects. Local policies must refer to higher regulations, particularly Law Number 1 of 2022 on Financial Relations between the Central Government and Regional Governments, as well as Government Regulation Number 35 of 2023 on General Provisions for Local Taxes and Regional Levies.