Redesigning Indonesian forest fiscal policy to support forest conservation

• Forest fiscal policy in Indonesia does not support sustainable forest management.
• We analyze the gaps between forest fiscal policy and its implementation.
• We use policy instruments: regulatory, economic, administrative and information.
• We found conflicting regulations related to forest fiscal policy.
• Green fiscal policy framework is required for sustainable forest management.

The formulation of fiscal policy in the forestry sector was designed as a green incentive for local governments to conserve forest area in Indonesia. However, evidence demonstrates an increasing rate of deforestation occurred during the implementation of fiscal policy reforms. Thus, problems persist in the implementation of fiscal policies in the forestry sector. This study evaluates the gap between the rule and the implementation of forest fiscal policy, focusing on regulatory, economic, administrative, and informational instruments. There are four main findings of this study. First, there are several inappropriate and even conflicting regulations concerning local government authorities and forest conservation; second, the lack of coordination among agencies is one of the most important factors causing sub-optimal collection of “non-tax state revenues” from the forestry sector; third, forest fiscal policies in Indonesia mostly focus on collecting financial benefits from timber rather than preserving ecosystem functions, and; fourth, there is a weak management information system concerning forest fiscal policy. To address the gaps identified in this study, the implementation of green fiscal policy in the forestry sector must provide a comprehensive regulatory framework and improve the capacity of human resources.