Chief minister calls for a delay in controversial tax policy

Coordinating Minister for Economy Dorodjatun Kuntjoro Jakti has asked Finance Minister Boediono and director general of tax Hadi Poernomo to delay the implementation of the controversial tax policy, which creates cash flow problem to coal producers, according to a source.

The source told Petromindo.com that the delay was necessary because certain clauses in the ruling No. 144/2000 on value added tax (VAT) contradicted with the so-called PKP2B coal mining contract.

The government recently introduced a new ruling exempting coal producers from value added tax, and imposing the VAT on briquette producers. This has created cash flow problem to coal producers and traders. With the new tax policy, coal firms could no longer include VAT in coal prices for domestic sales. In the past, the inclusion of VAT in coal prices enabled coal producers to offset similar taxes imposed on their imported capital goods.

The Indonesian Coal Producers Association (APBI) has strongly protested the tax ruling, and had even planned to sue the finance ministry. The office of the coordinating minister for the economy asked the association to drop the law suit plan.(Godang)