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.