Govt begins tax execution against KBC executives

The directorate general of taxation has received an approval from the Ministry of Finance to use a force in the form of arrest or asset seizure to compel three executives of PT Karaha Bodas Company (KBC) to pay their tax arrears, which are estimated to reach Rp 12 billion, Bisnis Indonesia reported on Tuesday.

Director General of Taxation Hadi Poenomo said in Jakarta on Monday that the execution was carried out on Monday but he was not sure whether the three executives remained in the country.

The identities of the three executives are only available with their initials. They include RDMC, the director of KBC, MC, the finance director, and LSP, a KPC business partner. They are believed to have arrears in value added tax (VAT) totaling Rp 12 billion.

The tax arrears are part of KBC's unpaid taxes, which are estimated to reach US$125 million. The government hopes that the tax arrears could be used to partly finance the compensation demanded by KBC.

KBC sued Pertamina through the International Arbitrary Agency for the suspension of its geothermal project in Karaha, West Java in 1997 by the government. Pertamina were then asked to pay a compensation of US$271 million but the state-owned oil and gas company refused to settle the payment.

KBC's claim to Pertamina had sharply increased to US$290 million at the end of 2003 due to the accumulation of interest payment.

The Karaha Bodas project is one of dozens of mega projects, which were suspended by the government after the financial crisis hit the country in late 1997. The government, however, revoked the decision in 1998 after protests from developers, Caithness Energy,

Florida Power, Japan Tomen Power and their local partner PT Sumarah Daya Sakti. But in early 1998, the government again issued a decree to re-suspend the project. (*)