Govt revokes, reviews regional rulings
Govt revokes, reviews regional rulings
Moch. N. Kurniawan, The Jakarta Post, Jakarta
The central government has annulled one regional ruling and is reviewing another 14 following complaints that the rulings had produced unacceptable tax burdens for mining companies, according to a senior official at the Ministry of Energy and Mineral Resources.
Secretary-general at the Ministry of Energy and Mineral Resources Djoko Darmono said on Monday that regional rulings were considered in conflict with the contracts of works (CoWs) awarded by the government to the companies and with the existing regulations issued by the central government.
The revoked regional ruling was Decree No. 5/2000 on Coal Tax issued by Tapin regency in South Kalimantan.
The ruling was declared invalid by the Ministry of Home Affairs, which is authorized to do so under the existing law, at the request of the Ministry of Energy and Mineral Resources.
"With regard to the other 14 rulings, the review process for four of them has been completed by the Ministry of Energy and Mineral Resources and the Ministry of Home Affairs has been asked to annul them.
"We (the Ministry of Energy and Mineral Resources) are still reviewing the other ten," Djoko told The Jakarta Post on the sidelines of a seminar on the relationship between mining companies and regional administrations.
The four regional rulings that await revocation are Decree No. 2/2000 issued by the Kutai regency administration in East Kalimantan, Decree No. 2/2000 issued by the North Barito regency in South Kalimantan, Decree No. 20/2000 issued by the Samarinda mayoralty in East Kalimantan, and Decree No. 21/2001 issued by Bangka regency in South Kalimantan.
Djoko said that all the regional rulings had levied new taxes on mining companies operating within the regions, aside from the list of taxes payable by the company under the CoWs.
Under the CoW system, mining companies are only obliged to pay taxes outlined in their contracts. This aims to protect mining investors against any changes in tax policies, issued by either the central or local governments.
Following the implementation of regional autonomy early last year, several regions vied to create new taxes on foreign investors operating in their respective areas, to increase their income.
"We have warned the regional administrations not to issue such rulings as they would hurt investment in their respective areas, but they insisted on going ahead," he added.
Several agencies have issued lists of regional regulations that are considered to impede investment and business activities.
The International Monetary Fund, which is providing a bailout for the country to recover from the economic crisis, has identified 100 regional regulations that it considers an obstruction to business and investment.
The Indonesian Chamber of Commerce and Industry (Kadin) stated last October that more than 1,000 regulations issued by the regional governments should be revoked because essentially they hampered business.