Tax incentive facility for oil exploration should be maintained: official

The tax incentive facility for oil and gas exploration activity in Indonesia should be maintained in a bid to attract new investment in the sector, according to a senior official of the ministry of mineral resources and energy.

Director general of oil and gas Rachmat Sudibyo was quoted by the evening Suara Pembaruan daily as saying that dropping the value added tax (VAT) facility could hamper the realization of oil and gas investment plans in the country.

?Over the past five years, we have given (VAT) incentive for the PSCs (production sharing contractors of the state oil and gas firm Pertamina) which plan to make oil and gas exploration investment in Indonesia. If it (the facility) will now be dropped, there will be a decline in the interest of investors investing here. That?s why we have sent a letter to the finance ministry to maintain the incentive. But until now there has been no decision yet,? Rachmat said.

The tax incentive is in the form of a delay in the payment of the VAT.

Rachmat said that the tax facility did not create too much burden to the state, but was a very important factor to attract new investment in the oil and gas sector.

He said that the other form of incentives including changing the current 85:15 percent oil and gas revenue split between the government and the PSCs to 80:20, or allowing investors to borrow money for exploration activity would be more costlier to the state.

Separately, staff expert of the minister of mineral resources and energy Kardaya Warnika said that if the tax incentive facility was eliminated, there would be some 10 foreign oil and gas firms ready to drop their investment plans.(*)