The Sustainable Madani Foundation summarizes several important events related to the economic and political conditions that occurred in the past week (June 8-June 14, 2021). Here are the excerpts:

1. The Government Will Create an Omnibus Law on Digital Affairs.

The government plans to create an omnibus law to regulate the domestic digital world. Coordinating Minister for Political, Legal, and Security Affairs Mahfud MD stated that the plan to create an omnibus law on digital affairs is a follow-up to a report from the State Intelligence Agency (BIN) referring to case studies in several countries.

BIN itself stated that there were many intelligence attacks on national defense. In addition, BIN discovered a number of clusters that systematically produced hoaxes that could endanger society and the state.

This law will regulate consumer data protection, personal data protection, electronic transactions in the form of money, and news transactions. Furthermore, the digital omnibus law will strengthen national cyber defenses, including anticipating intelligence attacks. The laws to be integrated are the Personal Data Protection Law, the Draft Law on Cybersecurity and Resilience, the Anti-Money Laundering Law, and other sectoral regulations.

The omnibus law regulations will also refer to the Draft Criminal Code (RKUHP). He also confirmed that this omnibus law will be implemented over the long term.

2. Draft of the Criminal Code Bill

After deliberations on the Draft Criminal Code (RKUHP) were postponed due to massive protests in 2019, the government and the House of Representatives (DPR) are again attempting to pass the bill. Several problematic articles remain, including the reinstatement of the article on insulting the president.

The problematic provision is located in Chapter II of Criminal Acts Against the Dignity of the President and Vice President, specifically Article 218 paragraph 1, which reads: "Any person who publicly attacks the honor or dignity of the President or Vice President shall be punished with a maximum prison sentence of 3 (three) years and 6 (six) months or a maximum fine of category IV." The threat of imprisonment increases to four (4) years and six (6) months if the insult is committed via electronic media.

Minister of Law and Human Rights Yasonna Laoly stated that reviving the provision would not criminalize public criticism. According to him, the article was enacted to protect the president and vice president from personal insults, not criticism. Furthermore, Yasonna said, the article would be made a complaint-based offense. This means the president or vice president would have to file a complaint with the police first before criminal prosecution for insults can be implemented.

Hibnu Nugroho, a professor of criminal law at Jenderal Soedirman University (Unsoed) in Purwokerto, believes the enactment of the article on insulting the president is a step backward. Indonesia has chosen a democratic system, and freedom of opinion and expression should be protected. He believes the use of a complaint offense does not address the shortcomings of this article. This is because there are still no clear definitions for the phrase "attacking honor, dignity, and self-respect." Hibnu also considers the wording of the article odd, as "attacking honor, dignity, and self-respect" can only be committed against individuals, while the president and vice president are state institutions.

In addition to the article on insulting the President, Article 353 paragraph (1) of the draft Criminal Code also states that anyone who insults public authority or state institutions in writing or verbally can be punished with a prison sentence of one year and six months. In the same article paragraph (3), complaints can only be made by the party who was insulted. Likewise, Article 354 states that the prison sentence is 2 years.

Trisakti University criminal law expert Abdul Fickar Hadjar believes the article on insulting the House of Representatives (DPR) in the draft Criminal Code (RKUHP) is excessive. This would actually degrade the Criminal Code. According to Fickar, the Criminal Code should apply generally, not accommodate the interests of specific individuals or institutions.

3. G7 Leaders Commit to Increasing Climate Finance Contributions

G7 leaders will commit on Sunday (June 13, 2021) to increasing climate finance contributions. As reported by Reuters, this commitment is to fulfill a delayed spending pledge of US$100 billion (Rp 1,424 trillion) annually to help poorer countries reduce carbon emissions and combat global warming.

As part of a plan billed as helping accelerate financing for infrastructure projects in developing countries and the shift to renewable and sustainable technologies, the world's seven most developed countries will re-pledge to meet the target.

4. Indonesia Needs IDR 3,461 Trillion to Address Climate Change

Indonesia has committed to reducing carbon emissions by 29% by 2030, funded either independently or through the state budget. According to Finance Minister Sri Mulyani, Indonesia needs Rp 3,461 trillion to meet this commitment.

This means the country needs to allocate at least IDR 266.6 trillion per year to address climate change until 2030. Meanwhile, Sri Mulyani said, government spending on climate change is only IDR 86.7 trillion per year, equivalent to just 4.1% of the state budget.
Febrio Kacaribu, Head of the Fiscal Policy Agency at the Ministry of Finance, also stated that the funding requirement increased after the NDCs roadmap was established. The figure increased to the equivalent of IDR 3,779 trillion by 2030. This means an average annual funding requirement of IDR 343.7 trillion.

Sri Mulyani explained that her government has addressed climate change issues using various government instruments. One such effort is the issuance of green bonds, or green sukuk bonds. Most recently, she said, the government successfully issued a global green sukuk worth US$750 million, or Rp 10.5 trillion (at an exchange rate of Rp 14,000 per US dollar), with a 30-year term.

In addition to debt instruments, the Ministry of Finance's efforts to address climate change include taxation. This effort aims to encourage companies to produce environmentally friendly products. Most recently, the government will also impose a carbon tax on carbon emissions that negatively impact the environment. The planned tax rate will be set at a minimum of IDR 75 per kilogram (kg) of carbon dioxide equivalent (CO2e) or equivalent unit. This is already outlined in the circulating draft revision of the General Taxes and Expenditure Bill (RUU KUP).

5. Discourse on a 12% VAT Increase

Finance Minister Sri Mulyani Indrawati will raise the Value Added Tax (VAT) rate to 12% from the current 10%. This is stipulated in the fifth amendment to Law Number 6 of 1983 concerning General Provisions and Tax Procedures (KUP).

Sri Mulyani stated that this policy is being implemented to ensure tax revenues reach their target. Next year, tax revenues are projected to reach Rp 1,499.3 trillion to Rp 1,528.7 trillion, representing a growth of 8.37% to 8.42% compared to the 2021 projection. Another reason is that the government considers the current global trend to optimize VAT collection over income tax, as there is a continuing downward trend in income tax.

According to the draft KUP Bill, tariffs can be changed to a minimum of 5% and a maximum of 15%. The government will also impose different tariffs on each good/service. The different tariffs referred to will be a minimum of 5% and a maximum of 25%. Furthermore, basic necessities will be removed from the list of goods exempt from VAT.

According to the draft General Tax Provisions Bill (RUU KUP), there are three tariff options for imposing VAT on basic necessities. First, the proposed general VAT rate of 12 percent would be applied. Second, a lower rate of 5 percent would be imposed under a multi-tariff scheme, legalized through the issuance of a Government Regulation. Third, a final VAT rate of 1 percent would be used. This policy has undoubtedly driven up prices of basic necessities in the market and drawn criticism from various parties.

In addition, the government will also impose Value Added Tax (VAT) on a number of services. This is stipulated in the KUP Bill proposed by the government and will soon be discussed with the House of Representatives (DPR). Based on the new KUP Bill, several sectors that were previously not subject to tax are now subject to tax. The services subject to tax are very diverse, ranging from medical services, social services, postage-delivery services, financial services, insurance services, educational services, broadcasting services that are not advertising, public transportation services on land and water, as well as domestic air transportation services that are an integral part of international air transportation services, labor services, public telephone services using coins, to money transfers by money order.