Minister criticizes North Barito's new tax policy

Minister of Energy and Mineral Resources Purnomo Yusgiantoro has faulted the recent move by the North Barito regency administration in Central Kalimantan to impose new taxes on the mining companies operating in the area.

In a letter to the Barito regency administration and council dated Nov. 30, whose copy was made available to Petromindo.Com on Monday, Purnomo said the move went against the contract of work (COW) awarded to the mining companies.

The copies of the letter were sent to Minister of Home Affairs and Regional Autonomy, Finance Minister, governor of Central Kalimantan and gold mining company PT Indo Muro Kencana.

The minister said Indo Muro Kencana, which operates gold mines in the regency, was not obliged to pay the new tax as the third generation COW, which was awarded by the government to the company on Feb. 27, 1985, had clearly specify all the company's tax and non-tax obligations.

Under the COW, Purnomo said, Indo Muro had only to pay common taxes; dead rent; exploration and exploitation fees (royalty); regional taxes which are approved by the central government and are not in conflict with the prevailing regulation; and as well as the central government-approved fees for public administration and the use of facilities, service and special rights awarded by the government.

The COW also obliged Indo Muro to carry out community development, he said.

"The company is only obliged to meet financial obligations specified in the regulations which came into force at the signing of its contract," Purnomo said.

Purnomo made the statement following the regency's recent move to issue two bylaws, namely the Bylaws No. 4/2000 and No. 6/2000, which oblige mining, forestry and plantation firms to pay the regency the so-called "regional developmental taxes".

Under the bylaws, which will come into force in January 1, 2001, gold, silver, diamond and coal mining companies have to deliver 0.1 percent of their sales in developmental taxes to the regency on top of their tax and royalties obligation set in their COWs.

The sales are reportedly calculated based on the "market prices" set by the regency, Indo Muro's government and public relations manager Hidayat Sunarto recently told Petromindo.

Indo Muro is a subsidiary of Australian mining firm Aurora Gold.

Purnomo only mentioned Indo Muro in its letter that it remains unclear if he also wants the regency to free other mining companies operating in the regency from the new tax obligation.

But, the minister said the regency could only impose the new tax obligations on the mining companies which would receive mining contracts. (Bodega)