Cocoa body asks for removal of VAT

Cocoa body asks for removal of VAT

JAKARTA (JP): The Indonesian Cocoa Association yesterday urged
the government to remove or postpone the implementation of value-
added tax (VAT) on all primary agricultural products.

The association's chairman, Litha Brent, in a hearing with
members of the House of Representative's Budgetary Commission,
said yesterday that such a tax will be burdensome to farmers
because in practice, the tax is imposed on a commodity's sale
price at the farmer level.

Apart from that, Brent said, the value-added tax, which is
based on Law No. 11/1994 and Government Regulation No. 50/1994,
is not consistently imposed across the country.

"There is no such tax in North Sumatra and South Sulawesi, but
there is in East Java," Brent was quoted by Antara as saying.

Brent said the tax was also becoming a cause of concern to the
processing firms of various agricultural products, such as black
tea and essential oil. It also reduced the competitiveness of
Indonesian cacao products on the international market, Brent
added.

He said the imposition of VAT on cacao beans was based on the
consideration that the beans must be halved, fermented and washed
before being dried.

"This line of process is in fact required for distribution and
marketing purposes so the beans do not rot," Brent said.

Brent pointed out that coffee beans are also processed in the
same manner but no VAT is imposed on this commodity.

Brent said farmers actually prefer to sell or export cacao
beans rather than process them beforehand, as it is less costly.
Brent considered it would be more appropriate if VAT was imposed
on companies which process dried cacao beans into value-added
products.

Indonesia's cacao production is presently about 385,000 tons a
year, or 13 percent of the world's production of three million
tons.

According to the Indonesian Cocoa Association, domestic
production is expected to increase to 400,000 tons by year 2000
in healthy and favorable weather conditions.

Bad weather and an epidemic of the cacao borer has steadily
cut back Indonesia's exports since 1993. That year, exports
reached 215,000 tons and dropped to 200,000 tons in 1994 and to
196,443 tons in 1995.

Indonesia is currently a major supplier of cacao to the United
States, after production in neighboring countries like Brazil
declined.

World production since 1991/1992 has faced a deficit of about
60,000 tons a year, but in 1995/1996, a surplus of 90,000 tons is
expected.

The surplus is expected to come from the recovery of
production levels in the Ivory Coast which reached 1.2 million
tons from an average of 900,000 tons in previous years.

The world's annual cacao production has been steady at about
2.4 million to 2.5 million tons in the last few years and is
expected to reach 2.7 million tons in 1995/1996. (pwn)