Govt plans value added-tax on coal

Government plans to impose value added-tax (VAT) on coal, making coal one of the items subject to tax.

Director of Tax Information affairs of the Finance Ministry Erwin Silitonga said that under the bill on tax, the government proposes the coal be subject to tax to allow coal exporters to get reimbursement (tax restitution) for money they spend on tax, minergynews.com reported Monday.

"With coal being subject to VAT, producers of coal can get tax restitution when exported the item," he said following a workshop on tax in Jakarta on August 10, 2006.

He said that proposal on imposing VAT on coal has been included into the draft law on tax that will be discussed at the House of Representatives (DPR) soon.

The draft law on tax is expected to be legalized in January 2007, he said. On tax restitution, Erwin said that the Directorate General of Tax would start to reimburse the tax payment by coal producers starting July 2006.

Earlier reports said that a number of coal producers had complained about their financial problem that affects their cash flow because the government has yet to reimburse the money they spent on tax. This is because the Ministry of Finance has issued a regulation that include coal into a non-taxed items.

Consequently, the customs and excise officers imposed levy on the coal exported to other countries. The coal producers have expressed their disagreement on the imposition on levy on coal, saying that the practices (on imposing tax on coal) is harmful to their business. (*)