Minister of Finance finally scraps coal export tax

The Ministry of Finance has removed export tax on coal following the Suppreme Court's ruling which declared the government regulation that obliges coal exporters to pay the tax is legally invalid, Bisnis Indonesia reported on Saturday.

The new tax policy, which was issued on Oct. 20, 2006, takes effect retroactively as of Sept. 13, 2006, according to the newspaper.

The government started imposing 5 percent tax on coal exports in 2005 in order to curb the export of the commodity and as such ensure more supplies on the domestic market. But the Supreme Court recently declared the Ministry of Finance regulation on the coal export was legally invalid and thus should be annulled.

It remains unclear if the government would impose another type of tax to replace the export tax.

Director of Tax Information affairs of the Finance Ministry Erwin Silitonga recently said that under the tax bill, the government proposes the 10 percent value added tax (VAT) be imposed on coal sales replacing export tax. This is to allow coal exporters to get refunds.

The Indonesian Coal Mining Association (APBI), which was opposed to the 5 percent export tax since it was implemented in October last year, has warmly welcome the tax bill.

"We strongly support the government's program because it is almost similar to what we have proposed to be included in the new tax bill,," APBI?s chairman Jeffrey Mulyono said in Jakarta recently.

According to him, the plan would benefit both the government and the producers. "Producers will, for example, be able to ask for some refunds from the VAT they already paid to the government.?

According to him, coal sales were subject to 10 percent VAT until the government removed the tax in 2001. "During that period, coal producers were required to pay 10 percent VAT but some could ask for tax refund up to six percent," he added. (*)