Tax office insists coal as non-taxable good

The Directorate General of Taxation insisted that coal is categorized as non-taxable goods, which means that coal miners can?t get restitution for value added tax on production inputs, Bisnis Indonesia reported on Monday.

Director General of Taxation Ken Dwijugiasteadi, however, said that for coal miners holding the so-called third generation coal contracts of work (CCoW), the tax office would follow the nature of the contract. He did not provide further explanation.

The statement comes after Executive Director of the Indonesia Coal Mining Association (ICMA) Supriatna Suhala recently reiterated long-standing complaints from coal miners holding the third generation CCoW that the tax office has given different treatment with regards to the VAT restitution. Some miners have been able to get the VAT refund, while others have failed. This inconsistency was also confirmed by the Supreme Audit Agency (BPK) in its audit report on government 2014 financial report.

Supriatna urged the tax office to end such discrimination, stressing that under the third generation CCoW, coal is VATable, which means that miners have the rights to get refund for the VAT on production inputs.

Meanwhile, the paper quoted Director for Communications and Public Relations at the Directorate General of Taxation Mekar Satria Utama as saying that the different was unavoidable because of the different terms of the coal contracts of work.

The third generation CCoW, signed between 1997 and December 29, 2000, stipulates coal as VATable. But Government Regulation No 144/2000 and Law No 42/2009 on VAT categorized coal as non-taxable goods, or non-VATable.

Mekar said that if the coal contracts follow prevailing laws, the coal miners must follow the Government Regulation No 144 and Law No 42/2009, meaning there?s not VAT restitution. However, if the coal mining contracts adopts nailed down laws, which treat coal as VATable, the tax office will honor the contracts.

When asked for comments, Minister of Finance Bambang Brodjonegoro said that this is a long-standing problem. He promised to look into the issue. The ministry oversees the tax office. (*)