Govt to introduce resource rent tax

JAKARTA (JP): The Ministry of Forestry and Plantations will change forestry royalties imposed on timber companies to a resource rent tax, as required by the International Monetary Fund (IMF).

Director General of Forest Utilization Titus Sarijanto said last week that the government would make the changes when log and plywood prices improved on the international market.

"We may abolish forest royalties when we introduce the resource rent tax," Titus said.

"It would be unreasonable to ask concessionaires to set aside part of their profits to pay both royalties and resource rent tax, especially when log and plywood prices are declining," he added.

He said the ministry was currently discussing the implementation of the resource rent tax with the Ministry of Industry and Trade.

However, he declined to say what rate the new tax would be set at. "We will review the ability of forest concessionaires to pay", he said.

Forest royalties currently make up about 6 percent of the price of forest products.

From total forest royalties paid, 45 percent is allocated to provincial administrations for local forest development, 20 percent goes to local administrations as land tax, 15 percent is retained by the central Ministry of Forestry office for national forest development and 20 percent goes to the state treasury.

Forest royalties are among a number of fees forest concessionaires have to pay.

Under the agreement between the government and the IMF, 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 than for domestic use.

The government reduced export taxes on logs, sawn timber and rattan to a maximum of 10 percent on March 1. (gis)