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Wednesday, December 28, 2011

Indonesian mineral export tax plan greeted with praise and criticism

Wed, 28 Dec 2011

The Jakarta Post reported that both praise and criticism showered the government’s plan to tax the export of minerals and base metals starting next year.Economists say such an initiative is a testament to the government’s long-term economic vision, in which local manufacturers are encouraged to add value to commodities, as well as contributing to national energy security.

For local miners, on the other hand, the upcoming export tax would be an additional burden that could affect their financial performance amid global economic uncertainties that could jeopardize future expansion plans. Mr Arif Hadianto a spokesperson for Indonesia fifth largest coal miner, PT Berau Coal Energy said coal producers already paid 13.5% of their total sales as royalties to the government, on top of the income and value-added taxes.

He said that “A new tax would automatically be a burden. The government must take into account that coal producers have an obligation to meet domestic demand.”

Separately, Resource Alam Indonesia head of investor relations Mr Erif Tirtana said small and medium-sized companies would be hurt most by the tax plan. He said that “The export tax will be a double tax, as we are already paying royalties. I just hope that the ministry will consider our grievances.”

Mr Bimo Budi Satriyo PT Antam corporate secretary said that the export tax would reduce his company profits. Bimo said that Antam which exports nickel to China, Korea and Europe had to give 5% off its sales prices per ton of high calorie nickel ore and 4% for every ton of low calorie nickel ore in royalty fees.

He said that “We still don’t know what the regulation will look like. As long as the government considers the royalty we are already paying. It will be okay.”

Mr Irwandi Arif Association of Indonesian Mining Professional chairman said that the government should calculate the amount of export tax to help companies maintain their profits. He said, the tax should be re-distributed to develop industry in the country.

He added that “The export tax should be used to provide incentives in development of coal-powered power plants for example in Mulut Tambang. It would be troublesome if the government fails to synchronize the use of the tax.”

The tax plan was first introduced last week by Industry Minister Mr Mohamad S Hidayat who said that the ministry was preparing the export tax on mineral products to encourage the development of derivatives products from minerals and base metals by local industries.

Mr Hidayat said the regulation was poised to be implemented in the first half of 2012, pending approval from the Finance Ministry. He said that “The growth of the downstream industry will create jobs, add value to our products and reduce dependence on imports. He promised that investors who invested in downstream industries would be given tax holidays.”

The planned export tax is in line with the ongoing process carried out by the Energy and Mineral Resources Ministry, which is drafting a regulation that will ban exports of raw mining products beginning in 2014. Prohibiting exports of raw mining product is a part of the government commitment to fully implement the 2009 Mineral and Coal Law, requiring miners to process coal and mineral into added-value products before exporting them.

(Sourced from

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