Coal producers welcome govt's plan to impose 10% VAT

The association of Indonesian coal producers (APBI) has warmly welcome the government's plan to turn coal into a strategic commodity and collect a 10 percent value added tax (VAT) from the coal sales in return for the proposed removal of the five percent export tax imposed on the commodity exports, Investor Daily reported on Tuesday.

"We strongly support the government's program because it is almost similar to what we have proposed to be included in the new tax bills which are now being deliberated by the House of Representatives (DPR)," the association's chairman Jeffrey Mulyono said in Jakarta recently.

According to him, the plan would benefit both the government and the producers. "Producers will, for example, be able to ask for government's refunds from part of the VAT they paid.

With the new plan, the government will reintroduce the 10 percent VAT but remove the controversial export tax as part of the change in the government's fiscal policy in the commodity.

Coal sales were subject to 10 percent VAT until the government removed the tax in 2001. "During that period, coal producers were required to pay 10 percent VAT but some could ask for tax refund up to six percent," he added.

The government has imposed 5 percent export tax on the commodity since the removal of the VAT. The export tax which was issued without a clear legal base has caused uncertainty among coal producers. Many of them, as the result, have delayed their royalty payment.

According to the existing regulation, coal producers which operate under PKP2B (Coal Contract of Work) contract are required to pay royalty of about 13.5 percent, while those operate outside PKP2B scheme are required to pay royalty of between five and seven percent. (*)