IPPs asks Supreme Court to settle VAT dispute

IPPs asks Supreme Court to settle VAT dispute

Moch. N. Kurniawan, The Jakarta Post, Jakarta

Independent geothermal power producers (IPPs) in the country are
putting their last hopes on the Supreme Court to independently
settle their dispute with the tax office over a controversial
value added tax (VAT) ruling.

Riki F. Ibrahim of the Indonesian Geothermal Association (API)
said that the IPPs could not expect a fair decision from the tax
court as many of the judges came from the Directorate General of
Taxes.

"We think many judges in the tax court are not neutral as they
came from the Directorate General of Taxes. How will the decision
be fair?" he told The Jakarta Post.

"We expect the Supreme Court, as the highest court, will be
able to decide our cases independently."

The Directorate General of Taxes ordered nine geothermal IPPs
and 33 oil and gas firms at the exploration stage to pay a 10
percent VAT starting 2000, a move seen by the companies as
against an existing contract signed with the government.

Under the contract, geothermal IPPs or oil and gas firms under
the exploration phase are allowed to delay the VAT payment until
they reach the commercial production stage. They said that this
was a facility introduced by the government in 1989 as an
incentive to investors in the particular sectors.

The protesting IPPs and oil firms then filed a complaint with
the tax court, previously known as BPSP or the tax settlement
dispute body.

The tax court, however, has so far issued six mixed rulings:
Four in favor of oil and gas companies Mobil Exploration
Indonesia, BP Indonesia, TotalFina Elf and an IPP Unocal
Indonesia, and two in favor of the Directorate General of Taxes
against Kufpec Indonesia Ltd. and Amoseas Indonesia.

Riki said that Amoseas, a wholly owned IPP of American firm
Chevron Texaco, is planning to file an appeal at the Supreme
Court.

He added that other IPPs would make a similar move if the
outcome of the court ruling went against them.

"At present, Amoseas Indonesia, who lost its legal battle at
the tax court last week, has confirmed an appeal to the Supreme
Court," he said.

According to a source close to the legal battle, Amoseas had
already paid some Rp 76.4 billion (US$8.2 million) in VAT.

The companies are required to pay the VAT first before going
to the tax court.

The Directorate General of Taxes has taken the controversial
measures in a bid to meet tax revenue targets in the state
budget. It could raise some Rp 2 trillion in additional VAT from
these companies.

The IPPs criticized the new policy, saying it would only
hamper investment in the country.

Officials of state-owned oil and gas firm Pertamina said the
protesting IPPs may bring the case to international arbitration,
which in many cases have inflicted multi-million dollar losses on
the government.