Minister of Industry opposes plan to scrap coal export tax

The government?s plan to scrap export tax on coal has apparently not gained supports from all Cabinet members as Ministry of Industry Fahmi Idris said on Thursday that the five percent tax on coal exports should be retained in order to protect the supply for the domestic market.

"The export tax is still needed in order to ensure sufficient coal supply in the domestic market. We don't want the gas supply problem also occurs in coal," Fahmi said, citing that due to lack of protection, most of the country's gas production is exported, causing shortage of supply in the local market.

With the statement, Fahmi put himself in conflict with the Ministry of Finance which has proposed the removal of export tax on coal in the tax bill that is being deliberated at the House of Representatives.

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.

According to him, the export tax was issued without a clear legal base and has caused uncertainty among coal producers. Many of them, as the result, have delayed their royalty payment.

The Ministry of Finance Decree of 2005 on Coal Export Tax affects all the country?s coal producers, except for the holders of the first-generation PKP2B (Coal Contract of Work) which, under the contracts, are only required to pay taxes as stated in the contracts. Holders of other contracts are obliged to pay taxes as stated in the existing regulations. (Godang)