Coal firms struggle to annul VAT ruling

Coal firms struggle to annul VAT ruling

Moch. N. Kurniawan, The Jakarta Post, Jakarta

Coal mining companies in Indonesia are working to have a value
added tax (VAT) introduced by the government in 2000 annulled.

The secretary-general of the Indonesian Coal Mining
Association (APBI), Jeffrey Mulyono, said on Wednesday the tax
policy had forced mining firms to hold royalty payments last
year, and had also discouraged new investment in the sector.

"We had no choice but to hold the royalties. Otherwise we
would have had negative cash flow," he said during a press
conference.

He feared that if the policy was maintained, some companies
would have to shut down their operations.

The new tax policy, contained in government ruling No.
144/2000, effectively abolished a restitution facility on the 10
percent VAT coal mining companies have to pay when purchasing
capital goods or services, because these companies can no longer
impose a VAT on their coal products.

"Our costs increased between 6 and 10 percent because of this
new tax policy, Jeffrey said.

There are some 19 coal mining firms in the country, which last
year produced more than 100 million tons of coal, exporting about
70 million tons.

"The impact on the whole economy will be ample. I'm worried
there will be no investment in this sector in the next four to
five years," Jeffrey said.

He said APBI was urging the government to cancel the ruling,
adding that a special team assigned by the government to review
the policy had made a similar suggestion.

But experts have said only small coal mining firms would
suffer financially under the tax policy, because of their higher
operational costs.