Indonesia will investigate the scope of tax evasion in the oil palm industry

Following the news that the government missed out on more than $3 billion in taxes from illegal oil palm plantations last year, Indonesian lawmakers are pressuring the administration to reveal the full magnitude of the country's unlawful oil palm plantations.

During a March 28 hearing with the environment minister, Siti Nurbaya Bakar, Dedi Mulyadi, a member of parliament from the Golkar Party, said, "The state suffered a tremendous loss."

"Corporations take over our lands and profit from them, yet they don't pay taxes." Why are certain people in this country able to become wealthy in a short period of time while others soon become impoverished?"

Siti told lawmakers that her ministry had discovered 505 illicit plantings inside forest regions that are supposed to be off-limits to plantation operations after being pressed by Dedi to put a number on how much the state was losing due to illegal plants.

According to Siti, based on their size and output, these plantations should have paid 44 trillion rupiah ($3.05 billion) in taxes in 2021, which is a fourth of Indonesia's COVID-19 budget. However, she noted, because they operate illegally, they never pay taxes.

Even this figure, however, is likely to be underestimated. Local parliamentarians in Sumatra's Riau province, one of Indonesia's primary oil palm-growing regions, discovered that the illicit farms operating there are robbing the province of at least 107 trillion rupiah ($7.4 billion) in potential revenue every year.

The fact that companies have been allowed to run plantations for decades without paying taxes, according to Hariadi Kartodihardjo, a forestry policy lecturer at the Bogor Institute of Agriculture (IPB), means the palm oil industry isn't the driver of development that the government often portrays it to be.

"How can we say the plantation industry is [empowering] when they haven't paid taxes for hundreds of years?" he asked Mongabay on the sidelines of an event in Jakarta.