Govt plans to cut export tax for serious, committed miners

By Bambang Atmaja

The government plans to reduce the export tax rate of mineral concentrate for miners who are committed and serious in constructing domestic smelter, a deputy minister said.

Deputy Minister for Energy and Mineral Resources Susilo Siswoutomo said on Friday, however, that the tax would not be cut down to zero percent.

?(We will) give discount to miners who are really committed to and very serious in constructing smelter,? he said. ?But it is impossible? to lower the tax rate until zero percent, added Susilo.

He did not disclose the size of the proposed tax discount.

The incentive comes following complaints from miners that the tax rate has been quite very high, exceeding the margins of some of the miners, which would undermine their entire operations.

On Jan. 12 the government slapped a broad export ban of mineral ores of nickel, bauxite, tin, chromium, gold and silver as they don?t have intermediate products, but still allowed the exports of so-called concentrates including copper, lead, zinc, iron, manganese, and ilmenite until 2017. But the exports are subject to punitive progressive export tax, at 20-25 percent this year, and gradually increases up to 60 percent in 2016.

In addition to the tax obligation, miners are also required to show commitment to develop domestic smelters to be able to obtain export recommendation from the Ministry of Energy and Mineral Resources.

Copper mining giants such as PT Freeport Indonesia and PT Newmont Nusa Tenggara have protested the export tax, arguing that such tax is not acknowledged in their mining contract of works signed with the government. They have threatened to go to international arbitration to settle the tax dispute, and may be forced to slash investment and work force to adjust to the new tax policy and tough exporter requirements.

Editing by Reiner Simanjuntak