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.