PT Freeport demands lower export duty

Gold and copper giant PT Freeport Indonesia has demanded for a lower export duty as part of conditions for the company to resume export of copper concentrates, Kontan reported on Tuesday.

The paper quoted Spokesman of the Ministry of Energy and Mineral Resources Sujatmiko as saying that PT Freeport initially insisted on zero percent duty, but following negotiation talks with the government, it finally agreed for an export duty of 5 percent (the same as last year?s), which is lower than the 7.5 percent duty set under a new ministerial regulation issued in January of this year. He said that the government is currently still reviewing the request of the company. ?Five percent is better than the zero percent duty they (the company) had demanded,? he told the paper.

PT Freeport Spokesman Riza Pratama declined to provide much comment, saying only the company has yet to resume export.

The new favor requested by the company comes after the Ministry of Energy and Mineral Resources recently issued a temporary IUPK mining business license for PT Freeport as a short-term measure to allow the company to resume export of copper concentrates which have been suspended since January, forcing the company to trim down production activities, and caused workers layoff.

The government issued a new regulation in January allowing miners to continue export of mineral concentrates for another five years but under certain conditions including converting their mining permit status from mining contract of work (COW) to IUPK, commitment to develop domestic smelters, and paying export duty, which is set at 7.5 percent under a new implementing regulation issued by the Minister of Energy and Mineral Resources (the export duty will gradually decline in line with progress of the smelter project).

While PT Freeport is willing to convert into IUPK, the company has demanded that the new license to have similar fiscal and legal terms as set out in the COW regime such as a nailed-down tax system, instead of a tax arrangement based on prevailing regulation as set under the IUPK. The request has been turned down by the government, triggering a dispute between the two.

Minister of Energy and Mineral Resources Ignasius Jonan then issued a temporary IUPK for PT Freeport so as to allow the company, while also maintaining the COW, to resume export. The temporary IUPK is expected to be valid until October 10, when the company and the government are expected to conclude ongoing negotiations to resolve their dispute.

Sujatmiko, however, said that despite the issuance of the temporary IUPK, which has drawn criticisms from various sides, PT Freeport, a local subsidiary of US Freeport McMoRan Inc, has yet to apply for an export permit to resume export as it demanded lower export duty. (*)