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.