Govt announces enactment of resource rent tax

JAKARTA (JP): The government formally announced Monday the introduction of the resource rent tax on the country's timber companies. It replaces the forest royalties.

Director General of Forest Utilization Titus Sarijanto said that based on Government Regulation No. 51/1998 issued April 20, forest concessionaires would be liable for the rent tax (also known as the resource royalty provision) for every forest product they collect from the forest.

"The rate of the resource royalty provision will be determined by the minister of forestry and plantations after taking into account the market prices of wood and wood-related products in the world market and the production costs," Titus quoted the regulation.

The resource rent tax, according to the regulation, will be levied on the timber companies' net revenues at a rate to be based on the average price of the wood in the international market.

Titus said that the rent tax rate would be announced soon.

As with the forest royalties, the receipts from the rent tax would be incorporated in the state budget, he said.

"The resource royalty provision will come into effect after the minister of forestry and plantations and the minister of finance issue their decree on its rate," Titus said.

Because wood prices are fluctuating greatly, the rate would need periodic adjustment, he added.

He said the amount of resource royalty collected by the government this fiscal year was expected to match last year's figure.

But he declined to comment on whether the introduction of the new tax would push up state receipts from timber companies.

Forest royalties, about 6 percent of the sales of forest products, are one of more than 12 levies currently imposed on timber companies.

Their amount depends on the type of product and its origin, meaning that the same species of timber may be subject to a smaller royalty if it comes from an area with sound roads and transportation facilities.

Under the agreement between the government and the International Monetary Fund, the government is required to replace certain export taxes with resource rent taxes to protect the environment and eliminate the bias against production for export rather for domestic use.

Minister of Forestry and Plantations Sumahadi said earlier this month that the resources rent tax for logs could amount to between 20 percent and 25 percent of logs' export value.

The executive director of the Association of Indonesian Wood Panel Producers, A. Tjipto Wignjoprajitno, said that forest concessionaires did not consider the royalty an obstacle to becoming more competitive because it was designed to guarantee that forest areas were managed in an environmentally sustainable manner. (gis)