Govt vows gradual cut in export tax on logs

JAKARTA (JP): The government will gradually cut taxes on logs to reach 10 percent in two years to guarantee a sufficient supply for domestic demand, the forestry and plantations minister said Thursday.

Sumahadi said the decision would not contravene the government's reform commitment made to the International Monetary Fund (IMF) in January.

"It is the best way to avoid timber companies from overexploiting our forests for export without providing a supply for domestic industries," he said.

The 50-point agreement with the IMF stipulates that "in March 1998, export taxes on logs, sawn timber, rattan and mineral will be reduced to a maximum of 10 percent ad valorem, and appropriate resource rent taxes are imposed".

Sumahadi said the government currently imposed 30 percent export tax on logs.

By the end of December this year, he said, the tax would be reduced again to 20 percent. By the end of December 1999, the export tax would be cut further to 15 percent.

The government would further reduce the tax to 10 percent by the end of 2000, he said.

Sumahadi also said that the export taxes would eventually be replaced by resource rent taxes, as required by the IMF, to protect the environment while eliminating the bias against production for export rather than for domestic use.

He added that he was still waiting for a directive from President Soeharto on regulating resource rent taxes.

The government previously imposed an export tax of 200 percent on logs. The high tax was aimed at encouraging timber companies to fulfill local demand and force buyers to purchase Indonesian processed, higher-value wood products. (gis)