Aburizal, Hatta oppose VAT for ports

Aburizal, Hatta oppose VAT for ports

Rendi A. Witular, The Jakarta Post, Jakarta

The government will review a recently issued regulation that
allows a value-added tax (VAT) to be imposed on regional ports
doing transactions with global shipping firms, following protests
from the international business community.

Coordinating Minister for the Economy Aburizal Bakrie said on
Wednesday he would review the regulation, which was not
coordinated with his office.

"My office was not informed of the new regulation. We are
likely to review it and see whether it is against the existing
tax regulations and international business practices," said
Aburizal before meeting with President Susilo Bambang Yudhoyono.

Aburizal was commenting on a ruling by the Ministry of
Finance's Directorate General for Taxation, placing a 10 percent
VAT on ports for any transaction with foreign container vessels.
The policy became effective on July 1.

Many ports have refused to bear the costs by themselves and
have shifted the tax burden to foreign shipping companies.

Among those local ports that have shifted the VAT to shippers
is container terminal operator PT Terminal Peti Kemas Surabaya
(TPKS), which manages export and import activities for the
Tanjung Perak Port in the East Java capital Surabaya.

The operator has obliged foreign vessels docking at its
terminal to pay the VAT for transactions related to terminal
handling charges since July 15.

However, shipping firms, some grouped under the Overseas
Shipowners Representative Association (OSRA), oppose the move and
have refused to pay the VAT, saying it violates an international
tax treaty on international trade.

Minister of Transportation Hatta Radjasa said the opposition
of the international business community had forced him to discuss
the problem with Minister of Finance Jusuf Anwar and Director
General of Taxation Hadi Purnomo.

"The regulation was issued at a time when we are trying to
combat the high-cost economy at ports. It goes against efforts to
boost efficiency, and I will urge the related ministry and
agency to revoke the regulation, which otherwise will burden the
economy," said Hatta.

Hatta said he feared foreign shipping companies would refuse
to dock in Indonesia since the regulation was not only a burden,
but also violated the international tax treaty.

Hatta said that he would bring the problem to a Cabinet
meeting with President Susilo since the dispute involved several
ministries.

The regulation was issued at a time when the cash-strapped
government is in dire need of additional funds to cover a soaring
fuel subsidy that could reach more than Rp 130 trillion (US$1.34
billion) due to a spike in global oil prices and increasing fuel
consumption at home.