Underground Water - Tax on Use and Exploitation

Underground water (air bawah tanah) has been a critical water reserve for Jakartans for many years. However, the uncontrolled exploitation of this water has given rise to many potential problems in the future and perhaps none more pressing than the fact that Jakarta is sinking. This is a direct result of the continuing depletion of the underground water reserves upon which the city rests.

The government of Jakarta has been taxing the use of underground water for some time as is evidenced in Gubernatorial Decision No. 4544 of 1999, Regional Regulation No. 10 of 1998, and Regional Regulation No. 1 of 2004 both of which deal with the basic cost of underground water and taxes on its extraction and use. This Gubernatorial Regulation, No. 37 of 2009, sets out Water Receipt Values (Nilai Perolehan Air / NPA) for the use and exploitation of underground water.

Basically, the NPA is a simple multiplication of the volume of the water extracted and the water base price (Harga Dasar Air / HDA). The regulation is technical in nature and includes all the formulas that are to be used in calculating the amount of tax due on the water extracted and used.

The amount of NPA is determined wholly or partially by, among others, these factors:

Furthermore, the tax on the extraction and utilization of underground water is simply defined as every extraction and utilization of underground water through the following activities, including excavation, drilling, or lining.

The subjects of this regulation, which includes individuals, non-commercial and commercial entities, seem unlikely to consider the tax a burden on the production costs of their businesses, as the level of extraction and use has been consistently rising over time and this rate does not look likely to fall..

Nevertheless, it is expected that the tax will bring some balance with regards to greater emphasis on rehabilitation. The regulation stipulates that there is compensation payable for the extraction and use of underground water. The compensation is divided into two kinds: (i) rehabilitation compensation, and; (ii) allocation and management compensation.

The Regulation repeals and replaces Governor Decision No. 4554 of 1999.