Surface Water Tax Plan Sparks Concerns, Could Disrupt Palm Oil Investment and Competitiveness
JAKARTA, KOMPAS.com - A forestry law expert from Al-Azhar Indonesia University, Dr. Sadino, assesses that regional governments’ plans to implement a Surface Water Tax (PAP) of Rp 1,700 per palm tree per month contradict legal regulations.
He believes the policy needs to be reviewed to avoid conflicting with the philosophy of taxation or applicable laws.
“Regional regulations, gubernatorial regulations, or draft regional regulations currently in process related to PAP need to be re-examined,” Sadino said in an official statement on Wednesday (22/4/2026).
“The basic concept of the Surface Water Tax is not imposed on plants, but on actual activities of taking or utilising surface water,” he continued.
It is known that several regions planning to implement the tax include the Riau Provincial Government, West Sumatra, and Bengkulu.
They are applying 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 PAP receipt target of Rp 594 billion, initially focusing on non-smallholder palm plantations.
“This plan has sparked protests from palm industry players, which could disrupt the competitiveness of the national palm oil industry,” he explained.
He clarified that the regulations stipulate that the object of PAP only applies if there is activity of taking and/or utilising surface water.
“If there is no taking or utilisation of water, then there is no taxable object. What can be taxed is surface water, not rainwater that falls directly and is absorbed by plants,” he said.
Sadino views the PAP scheme based on the number of palm trees as still leaving technical issues in field calculations. According to him, each tree has different classes and water needs.
Meanwhile, in common palm plantation practices, there is generally no specific activity such as pumping or taking surface water for irrigation, but rather utilising natural water flow.
“Palm trees are not uniform. There are young ones, productive ones, and old trees—how to determine their water utilisation. I think this is a misunderstanding. How can a tax be discriminatory only for palm trees,” he stated.