PLN must pay income tax for assets revaluation

The director general of taxation at the Ministry of Finance, Machfud Sidik, said that state electricity company PT PLN must pay income tax of around Rp 10 trillion for income resulting from assets revaluation.

"Ruling on taxation must be imposed equally to anyone, to any company. Not because of a state company, it is waived from paying the tax. PLN must pay the tax," Machfud told Bisnis over the weekend.

Coordinating Minister for Economic Affairs Rizal Ramli has required PLN to re-value its assets in a bid to help overcome the state electricity company's problems in its finance balance, which tended to be negative.

PLN's assets would expand drastically after revaluation because most of PLN's fixed assets were denominated in U.S. dollar.

Machfud said that the requirement for PLN to conduct assets revaluation was that PLN must be committed for not selling the assets for the next five years. If it wanted to sell one or some of the assets, it must get approval from his office.

When asked if he would be giving some tax leeway for PLN, Machfud said that he had no authority to give such facilities, moreover to waive tax payment for PLN. However, if the government made a favorable decision for PLN such as the conversion of PLN's short-term obligations to the government into equity, the tax office would implement the decision.

Earlier, Minister of Energy and Mineral Resources Purnomo Yusgiantoro said that the government was considering giving income tax exemption to PLN's income resulted from asset revaluation provided that the revaluation could be completed by January 2001, when the new tax law would come into force.

Nevertheless, according the government's tax rules, the difference in the value of assets resulted from assets valuation would be subject to 10 percent income tax.

PLN president Kuntoro Mangkusubroto said recently that PLN's assets were currently valued at Rp 68 trillion. After revaluation, the assets would expand to Rp 193 trillion, with an assumption that the rupiah stood at Rp 8,000 per U.S. dollar. If the rupiah stayed at the current level of over Rp 9,000 per U.S. dollar, PLN assets would expand further.

According to Kuntoro's calculation, if the government did not give tax exemption to PLN, the company would have to pay income tax of Rp 10 trillion from assets revaluation. He noted that the value difference after revaluation would be around Rp 120 trillion (Rp 190 minus Rp 60 trillion), and this value would be reduced again by PLN's this year net losses of around Rp 20 trillion, and it would come taxable income of Rp 100 trillion. (*)