Uncertainties in tax policy hamper oil and gas investment

Uncertainties in the government's tax policy have significantly hampered investment in the country's oil and gas sector, according to the Indonesian Petroleum Association (IPA).

Speaking in Jakarta on Tuesday, the executive director of the association, Suyitno Patmosukismo, said that at present investors were reluctant to enter the oil and gas sector due the uncertainties in the tax regulation.

He cited the government's new policy on import duty and value added tax (VAT) as the examples of the tax uncertainties.

"Unlike in the past where investors were allowed to pay either their import duties or value added tax after they began their commercial production, at present they are required to pay the taxes in advance when they start their works," he was quoted by Investor Daily as saying.

Suyitno aknowledged that the government, under the existing tax regulation, had to refund the import tax and VAT payment within certain period of time. "But in the reality, the tax refund did not run as expected. The unpaid tax refund has already reached Rp 1 trillion," he said.

Suyitno said that the association's members appealed to the government to immediately disburse the unpaid tax refund because they really needed the money to finance their investment activities.

Besides tax problem, the association also listed nine other problems that the new government has to deal with in a bid to attract new investment in the oil and gas sector. They include the improvement of inter-governmental coordination, synchronization of policies between central and regional governments, the improvement of dialogues between government and stakeholders, sanctity of contract, consistency in the implementation of production sharing contract, the clarification of the status of BP Migas and evaluating the fiscal terms in the existing contract. (*)