Govt to ask Japan to ease coal tax

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said the government is backing Indonesian Coal Mining Association (ICMA) objection toward coal tax formula that will be imposed by Japan?s government starting October this year.

?That?s not fair. Not only does Indonesia object to tax formula, but we are also object the to the tax as it would unfairly benefits Japan government at the expense of coal producers,? said Purnomo.

Purnomo said Indonesia would lobby Japan government to cancel coal tax in President Megawati?s scheduled visit to Japan in June.

ICMA last week said imposition of flat tax on coal regardless of its calorific value will hurt Indonesia?s export to Japan and benefits Australia as Indonesia exports mostly relatively lower calorific value to Japan.

ICMA called the government to lobby Japan government to impose coal tax based on calorific value, which means lower calorific value coal be taxed less.

?Suppose Indonesian coal price is US$20 per ton and Australian coal is $30 per ton. If the Japanese government imposes a flat tax of $2 per ton, then Indonesian coal will be 10 percent more expensive, while Australian coal is only 6.7 percent more expensive. That would give incentive to Japanese buyers to shift to Australian coal, which is not fair,? said Jeffrey Muljono, ICMA chairman.

Japan?s Ministry of Energy, Trade and Industry plans to impose tax on coal starting October this year with initial rate of $2 per ton, ramping up to $6 per ton in 2007. The proposed tax measure is part of an effort to overhaul the government?s Special Energy Account, which funds the development of clean energies and energy-related infrastructure, as well as for reducing greenhouse gas emissions.

Indonesia exports around 20 million tons of coal per year to Japan. (alex)