Tax Policy Reconstruction To Support Circular Economy Implementation In Indonesia: A Systematic Literature

Abstract

The transition from a linear to a circular economy (CE) is essential for sustainable development. Tax policy is a critical enabler in facilitating this shift, particularly in emerging economies like Indonesia. This study conducts a systematic literature review using PRISMA methodology to explore how tax policies can be reconstructed to support CE implementation. Based on 30 screened articles, with 12 critically reviewed sources, we identify key tax policy instruments, enablers, and theoretical gaps. Findings reveal that current fiscal policies often favour linear production systems, disincentivizing circular practices such as remanufacturing and recycling. The paper proposes actionable tax policy interventions, including targeted tax credits for secondary raw materials and performance-based eco-tax incentives. We also highlight barriers such as the absence of unified metrics, weak regulatory integration, and insufficient fiscal support. Recommendations are offered for Indonesian policymakers to recalibrate tax systems to align with circular economic goals.