Coal miner?s royalty arrears reach Rp1.7 trillion

Coal miner?s royalty arrears reach Rp1.7 trillion

Coal mining companies based in East and South Kalimantan have arrears of about Rp1.7 trillion (US$ = Rp9,000) to the government due to their refusal to pay royalties and development fees to the state, a government official said Friday

The defiant coal producers include the country's major coal mining companies PT Arutmin Indonesia, PT Kaltim Prima Coal (KPC), PT Kideco Jaya Agung and PT Adaro Indonesia, PT Berau Coal and BHP Kendilo Coal.

Bambang Hartojo, a senior official at the directorate of geology and minerals at the ministry of energy and mineral resources, said in Jakarta on Friday that the coal miners had not paid the royalties to the government since 2001.

According to their contracts, coal mining companies are required to pay 13.5 percent of their annual sales turnover to the government in the form royalties (6.5 percent) and development fees (7 percent).

The companies have refused to pay the royalties since 2001 following the issuance of a regulation which exempt coal from VAT, thus making coal contractors unable to reclaim the VAT they have paid to the government.

Bambang said that before the issuance of the regulation, the mining companies paid the royalties from the compensation of their VAT payment.

According to him, Arutmin has arrears of Rp233 billion, KPC (Rp415.9 billion), Kideco (Rp368.7 billion), Adaro (Rp484.7 billion), Berau Coal (Rp255.9 billion), BHP Kendilo Coal (Rp31.4 billion).

Meanwhile, chairman of Indonesian Coal Mining Association (ICMA) who is also president director of Berau Coal Jeffrey Muljono said that the above-mentioned coal mining companies which are operating under first generation coal contract of work (CCoW) has the right to retain the payment as they are netting off VAT refund that they considered owed by the government. ?The amount of the arrears is largely similar to the amount of fund owed by the government from VAT refund,? said jeffery. He said that under the first generation CCoW clausule, coal contractor couldn?t be levied new taxes that are not specified in the contract.

Jeffrey added that Supreme Court had given its opinion that the The Ministry of finance via Directorate General of Taxes (DGT) should grant coal contractor VAT refund and to declare that coal is VAT-subject commodity. But thus far, DGT has played deaf ears to the Supreme Court?s opinion.

Jeffrey hinted that those companies would stick to their gun by refusing to pay part of royalty payment. ?We have a very strong legal foundation to do that,? said Jeffrey.

Jeffrey warned that the amount of the arrears will increase over the time so long as DGT did not lift the VAT exemption regulation.

The smaller coal miners which are operating under the later generation of CCoW which refused to pay the royalties included Multi Harapan Utama, PT Tanito Harum, Indominco, and and Bahari Cakrawala Sebuku. Some of them have been declared defaulted and risk losing their permits. Jeffrey said that the case of those companies are different, as the latter generation coal companies are operating on prevailing fiscal regime, meaning that they have to pay taxes according to the current regulations. However, Jeffrey understood that those companies are having to hard time to pay for their royalty obligation as they are forced to pay more taxes than their first generation peers. (godang/alex)

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