Oil producers oppose govt?s plan to remove tax facilities

Oil and gas contractors have opposed the government?s plan to remove tax facilities despite the planned increase in their production shares, an industry source said on Wednesday.

The chairman of the Association of the Indonesian Gas Producers Anton Tjahyono said in Jakarta that the removal of the tax facilities would further inflate their production costs.

At present, oil contractors are freed from paying value added tax and import duties for the purchase of equipment such as oil rigs and pipes to be used for their exploration works. The Ministry of Finance, however, plans to withdraw these fiscal facilities in a bid to increase the state?s tax receipts.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro promised that oil and gas contractors would be given higher production shares, if the finance ministry goes ahead with its plan.

Anton said that it would be better for the government to retain the tax facilities rather than giving oil and gas contractors a higher share in the production split arrangements.

He feared that the removal of the tax facilities which is estimated to inflate operational cost by at least 20 percent would further discourage investors from entering the country?s oil upstream sector. (Godang)