Oil, gas contractors hit by another tax burden
Friday, September 4 2015 - 11:53 AM WIB
Oil and gas production sharing contractors (PSCs) have not been able to get value added tax (VAT) reimbursement worth about Rp 6.7 trillion for the period of January and February of this year as the fund has been withheld by the Directorate General of Budget at the Ministry of Finance, according to an industry source.
?This situation is alarming and will create difficulties for the state as the PSCs may launch arbitration (lawsuit) regarding the implementation of the PSC (profit sharing contract),? the source said.
The problem emerges after the Ministry of Finance late last year issued new regulation PMK No 218/2014 on the procedures for reimbursement of VAT or luxury sales tax (also known locally as PPnBM) in upstream oil and gas activities.
The source said that PMK-218 is in breach of the PSC principles as it limits the maximum amount of VAT and PPnBM reimbursement by excluding the so-called first petroleum tranche (FTP) which has been received by the government.
The source further said that the PSC system clearly says the government shall reimburse VAT out of its share without any limitation such as excluding the FTP.
The upstream oil and gas authority feels that this problem could potentially create dispute between the government and the oil and gas contractors, according to the source.
The source added that another problem triggered by PMK-218 as it also excludes VAT reimbursement from LNG plant operation.
The source said that the Indonesia Petroleum Association (IPA) and the SKK Migas have filed complaints with the Ministry of Finance (MoF) and Ministry of Energy and Mineral Resources. But the MoF via the Directorate General of Budget insists that the regulation on limiting the amount of VAT reimbursement had been jointly agreed by the directorate and SKK Migas.
According to the directorate, the philosophy behind the exclusion of FTP from VAT reimbursement is to help maintain state revenue from the oil and gas sector.
The source further explained that the tax court and the state administration court could not settle any possible dispute arising from the implementation of PMK-218. ?The only mechanism is via arbitration.?
Editing by Reiner Simanjuntak