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Under current regulations, mining companies must pay the government royalties of 13.5 percent from coal production, and 2.5 percent of net profits from gold and copper mining operations.

The mining companies are also required to pay land rent of about US$2 per hectare and various taxes including property tax and income tax of between 30 percent and 35 percent. In addition, they have to pay a 10 percent value added tax and import duties, and 7.5 percent tax dividends.

Government regulation No. 344/KMK.06/2001 on the distribution of state income from natural resources-based companies, clearly states that 80 percent of revenue from royalties and land rent will be allocated to local governments, and the remaining 20 percent to the central government.

Of the 80 percent of land rents paid to local governments, 16 percent goes to the provincial administration and the remaining 64 percent to the regency administration where the mining companies are located.

The distribution of the local government's revenue from mining royalties is slightly different from that of land rent. The provincial administration receives 16 percent and the regency where the mining companies are located gets 32 percent. The remaining 32 percent is equally distributed among other regencies and municipalities in the province. In addition to this revenue, local governments also receive part of the property taxes paid by mining companies.

The total payment mining companies are required to make to the government is among the highest in the world. But local governments, especially in regencies where the mining companies operate, cannot fully enjoy the benefit of the mining operations in their areas.

One of the problems is related to the transfer of royalty payments to the local governments' accounts. Because all of the royalties and land rents are paid through the central government, there is often a delay in the transfer of the money to local governments. Besides this delay, which in some cases can take up to a year, local governments often complain that the money they receive is smaller than it should be.

It is also difficult for local governments to check the amount of royalties and land rent paid by a mining company to the central government because of a lack of transparency in the operations of many mining companies.

A more worrying problem is that many coal mining companies, especially those located in East Kalimantan, have withheld royalties, claiming local governments have failed to stop illegal mining in their concession areas. Although the companies eventually agreed to fulfill their financial obligations, the payments are often very late, causing financial difficulties for the regencies, which rely on mining activities to fill the gaps in their budgets.

The sad fact is that people often blame mining companies whenever there is a problem in their operations. It is easy to accuse the companies of causing environmental damage, ignoring all the benefits they provide to local economies. --Hendarsyah Tarmizi