1. Tax (1 x 45)
1. Tax (1 x 45)
Company fights lone battle against tax extortion JP/13/Tax
Rendi A. Witular The Jakarta Post Jakarta
While members of the business community are generally afraid to argue with tax officials and would rather compromise with them in case of dispute, a local businessman has launched an all-out legal battle against the tax office.
The Constitutional Court recently accepted a petition from health equipment supplier PT Apota Wibawa Pratama to review the legality of the tax tribunal, which it said had created unfairness and a lack of legal certainty for the business community.
Apota director B.Q. Vega told The Jakarta Post last week that his company had decided to go to law after it fell victim to what he described as "unscrupulous behavior" on the part of tax officials, who were using the tax tribunal as a tool for extorting taxpayers.
"We have taken into account all the risks and pressures that may result from our actions ... Our effort is designed to encourage others to join the fight," said Vega.
Apota's lawyer Denny Palilingan said the firm had decided to petition the Constitutional Court to overturn Law No. 14/2002 on the establishment of the tax tribunal, which he said was repugnant to the 1945 Constitution.
He said the Constitution only recognized five courts -- the criminal and civil courts (public courts), religious courts, military courts, administrative courts and the Constitutional Court.
"Since it is not among the courts recognized by the Constitution, the legal standing of rulings handed down by the Tax Tribunal is questionable," said Denny.
He said the tribunal would have to be abolished if the Constitutional Court overturned the law.
In a second hearing with Apota last week, the Constitutional Court decided to summon those involved in the drafting of the law, including Minister of Finance Boediono and a number of legislators from the House of Representatives.
According to Denny, the tax court law was unfair, as was evident from the provision preventing taxpayers from appealing against its rulings.
Another unfair provision was the requirement that a taxpayer had to pay 50 percent of its total tax bill before filing an objection with the tax court. This was considered as burdensome as it could disrupt a company's cash flow, he said.
The high cost of filing objections with the court had caused some businesspeople to prefer to bribe tax officials.
A source in the Directorate General of Taxation agreed that the 50 percent payment requirement had often been abused by tax officials to extort taxpayers.
The source explained that tax officials could inflate the amount of the arrears owed by companies in order to discourage them from going to the tax tribunal.
Companies that were unable to come up with 50 percent of the tax arrears before going to the tax tribunal had no alternative but to seek a compromise with tax officials, including paying them bribes.
In the Apota case, the company booked a loss of Rp 240 million (US$28,235) in 2000, but officials from the Mampang Prapatan tax office in East Jakarta said the company had to pay Rp 877 billion in corporate income tax.
2. ASEAN (1 x 45)
Financial markets liberalization to top ASEAN meet
JP/13/ASEAN
Financial markets liberalization to top ASEAN finance ministers meet
Martin Abbugao Agence France-Presse Singapore
Southeast Asian finance ministers meeting here this week are expected to take stock of work done to liberalize the region's financial sector, seen as a cornerstone for an envisioned single ASEAN market, government sources said.
The review will come six months after the leaders of the Association of Southeast Asian Nations (ASEAN) agreed during their annual summit on a roadmap to achieve a European Union- style common market by 2020 or earlier.
Among the measures endorsed at the October meeting on the Indonesian island of Bali was a series of bold steps to develop, liberalize and integrate the region's capital markets and financial services.
Finance ministers drew up the measures during their annual meeting in Manila in August.
Singapore government sources involved in preparing this year's finance ministers' meeting, to be held on Tuesday and Wednesday, said the delegates were expected to "take stock" of work done since their last gathering in the Philippine capital.
"I don't think that you can expect any major breakthroughs. I don't think you're going to see any new initiatives that are going to come up," the official said.
Another official said discussions would look at progress on initiatives in four key areas, namely the development of capital markets, liberalization of financial services, the feasibility of an ASEAN common currency and liberalization of capital accounts.
These initiatives are aimed at bringing about a free flow of goods, services and investments as well as capital within ASEAN, which groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
Business executives say an integrated ASEAN market would do better to compete with China and a fast-rising India in terms of trade and attracting foreign investments.
A delegation from the U.S.-ASEAN Business Council, an American corporate lobby group, will also hold talks with the ministers.
Council sources said the delegation was expected to discuss the financing of small and medium enterprises and press the importance of financial services liberalization in free-trade agreements.
The finance chiefs will meet in an informal setting during a "retreat" on Tuesday ahead of their formal gathering on Wednesday.
On Monday, deputy finance ministers and central bank governors from ASEAN as well as China, Japan and South Korea will meet under the ASEAN Plus Three dialogue process.
Sources said a key topic at this meeting would be how to strengthen a mechanism called the Chiang Mai Initiative, which allows central banks from the 13 countries to swap foreign exchange reserves to fight speculative attacks on their currencies.
Bilateral swap arrangements, now totaling US$35 billion, have been signed under this scheme.
The initiative was launched in the northern Thai city of Chiang Mai in May 2000 as a response to speculative currency attacks that triggered the 1997/98 Asian financial crisis.
Any changes in the Chiang Mai accord are expected to be announced on May 15 after a meeting of the ASEAN Plus Three finance ministers in Jeju, South Korea, on the sides of the Asian Development Bank annual conference.
3. Oil (2 x 26)
Plan for oil contractors to offer 10% stake to regions
Fitri Wulandari The Jakarta Post Jakarta
The government is considering requiring oil and gas investors to give state companies in the regions a 10 percent stake in their business in a bid to increase the regions' share of oil and gas production.
The draft government regulations on oil and gas upstream activities require production-sharing contractors to offer the stakes to the regional companies when they began developing oil and gas fields.
Ministry of Energy and Mineral Resources oil and gas reserves director Iin Arifin Takhyan said the proposal would accommodate growing calls from the regions to share in the country's oil and gas wealth following the introduction of regional autonomy.
"It is in line with creating a fiscal balance between the central and regional governments," Iin said during the weekend.
Governors would select regional state-owned companies in their respective areas to buy the shares.
Iin said regional companies who bought participating interests would also shoulder a share of the investment costs to develop the fields. In turn, they would get shares in the oil and/or gas production business.
However, if no regional state companies expressed their interest 60 days after the share offer date, contractors would then offer them to national companies.
The offer would then close six days later if no national companies showed interest.
"Contractors would not be pushed into offering the (10 percent) stake in the case that there were no interested or capable regional companies," he said.
Onny Priyadi, the deputy head of Bojonegoro regional legislative council in East Java welcomed the proposal, saying the move meant the people would begin to benefit from the revenue generated from their oil and gas resources.
"People in oil and gas-producing regions remain poor, although there have been oil and gas projects in their regions for a long time. That is because the regions have not had the chance to participate in the process," Onny told The Jakarta Post during the weekend.
If this continued, it would lead to social unrest as happened in Aceh or Papua, he said.
Onny said revenue from oil and gas production could be used for the regions' economic and social development budgets.
A regional company in Bojonegoro had the financial and professional capabilities to work in the oil and gas sector, he said.
The company, PT Darma Asri Sejahtera, was already working in the sector in the area.
With initial capital of Rp 10 billion, the company planned to make investment in upstream (oil exploration and exploitation) and downstream (oil refining, fuel retailing and distribution) activities. It also planned to increase its capital up to Rp 20 billion.
"We can do it because we put professional people who know the oil and gas business in the company," Onny said.
Onny said the company hoped to get a participating interest in the Cepu oil and gas fields in the border area of Central Java and East Java, which is believed to contain huge oil and gas reserves.
State oil and gas company PT Pertamina has agreed to form a partnership with U.S.-based energy company ExxonMobil Oil Indonesia to operate the block.
4. Nokia (1 x 38)
Nokia confident in loyalty to Communicator JP/13/NOKIA
Finnish cellphone giant Nokia Pte Ltd has been leading the national market for years. The Jakarta Post's reporter Dewi Santoso recently talked with the firm's general manager for Indonesia Hasan Aula on the firm's business plan. Following are the excerpts of the interview.
Question (Q): How were Nokia's sales last year? Answer (A): Last year's sales were very good. I cannot give you the figures in terms of value or volume as they are confidential. All I can say is that we achieved the sales target.
Q: How many products did Nokia launch last year? A: We launched 25 products last year, including five CDMA (code division multiple access) and 20 GSM (global system for mobile communication) products. Of the CDMA products, the most popular types are the dual-band Nokia 3585 and the color-display Nokia 3586. Both are popular due to their user-friendly features and at affordable prices of around Rp 1.7 million (US$200). Of the GSM products, the camera-equipped Nokia 6600 is the most popular of all, thanks to its sophisticated technology and its elegant design, while the image-enabled Nokia 3650 is also on high demand due to its capability of displaying sharp images.
Q: There are a lot of camera-equipped phones coming out now. Will Nokia focus on this type of product? A: No. We shall introduce more camera-equipped cellphones in the future, but we won't abandon low-end users and will still provide mobile phones with no cameras.
Q: How many products will Nokia launch this year? A: We'll launch nine products. In January, we launched Nokia 6850, which is similar to Nokia 6800, except that the new one has a camera. Next month, we'll launch two CDMA products, Nokia 6585 and Nokia 6225. The latter is equipped with a camera. For youths who love games, we'll launch Nokia N-gage. For multimedia lovers, we have touch-screen-equipped Nokia 7700, which will come out in July. Hi-tech lovers buy 3-G and CDMA-supported Nokia 7600, while for those who love style, we'll launch Nokia 7200, the first clamshell product of Nokia in Indonesia. Also, there'll be Nokia 6230, which is as sophisticated as Nokia 6600. And in October, the market will see the more sophisticated Nokia Communicator, Nokia 9500, equipped with a camera.
We may have more products to come out, but we don't have the exact figures, yet.
Q: You just mentioned that Nokia would launch its first clamshell. Why did Nokia launch a clamshell mobile phone? A: We decided to launch a clamshell because we see there's a demand of it.
Q: Are you going to shift focus from monoblock to clamshell? A: No. We'll keep our focus on monoblock.
Q: One of the market trends now is cellphone combined with personal digital assistant (PDA). SonyEriccson has launched the type of product here, which is selling well. Will Nokia launch the same product? A: Nokia doesn't see the need to launch such products as Nokia offers more flexibility and features from its communicators. For sure, we're going to launch user-friendly phones, and they don't necessarily have to be highly sophisticated ones. For the time being, Nokia will not be launching a PDA-equipped mobile phones as Nokia has its Communicator, which provides better functionality and more flexibility.
Q: You seem confident with your Communicator. Aren't you afraid that PDA-equipped cellphones will gnaw at Communicator's market? A: No, because Communicator users are very loyal and reluctant to shift to another type as they have become comfortable with it. Q: What is your sales target for this year? A: Again, I cannot tell you the exact figure, but if you look at the penetration of cellular usage in Indonesia, only 8 percent of the total (220 million) population. It's a small figure as compared to Malaysia or the Philippines, where around 15 percent to 20 percent of the population use cellular phones. This means that we see a potential increase of almost twice than before in the market.