Tax arbitration decision will hurt oil and gas industry

The decision of the tax dispute settlement agency (BPSP) to reject the appeal of several Pertamina?s production sharing contractors will severely bring a negative impact on the operation of the country?s oil and gas industry, according to the International Geothermal Association (IGA).

Riki Ibrahim, the executive director of the association, said in Jakarta on Thursday that the tax arbitration body?s decision was partial and he feared that such biased decision would further discourage investors from entering the country?s oil and gas industries.

Several oil and gas operators including Amoseas Indonesia Inc, Kufpec Indonesia ltd, Enterprise Oil Ltd appealed the tax arbitration body to annul the tax office?s decision to require them to pay value added tax worth respectively Rp 77.169 billion, Rp 29.3 billion and Rp 450 million.

According to the companies they were not obliged to pay the VAT because their activities were still in development stages. They said that the VAT should be imposed on those, which have started their production activities.

Several other companies including Mobil Exploration Indonesia Inc and Atlantic Richfield are still in the process of their appeal. The companies are required to pay VAT worth Rp 292.193 billion and Rp 72.40 billion, respectively.(*)