| Abstract: | This article proposes a means for implementing environmentaltaxes in Indonesia at the sub-national government level, asa mechanism for correcting resource misallocation and negativeexternalities, specifically environmental protection and clean-up.The concept of environmental taxation is first reviewed, ingeneral terms. The ongoing fiscal decentralisation in Indonesiais then discussed as a potential legal framework for environmentaltaxes at a sub-national level. It is suggested that a combinationof environmental taxation with fiscal decentralisation wouldgive provincial and local governments in Indonesia a much-neededincreased revenue stream. It would also provide a further greendividend of effectively regulating and ameliorating negativeenvironmental effects. Implementation of the Indonesian fueltax beginning in 1997 is considered briefly as an actual casestudy of such environmental taxation at the sub-national level,with discussion of the effectiveness and efficiency in its (limited)administration by regional governments rather than the centralgovernment. Finally, within the context of fiscal decentralisation,widespread corruption and other potential hindrances to implementingenvironmental taxes at the provincial and local government levelin Indonesia are discussed and areas for further research andstudy are suggested. |
