Minister voices support for AEKI tax proposal

JAKARTA (JP): Minister of Agriculture Bungaran Saragih has backed a proposal for the annulment of a tax on coffee beans to assist farmers increase their income amid the prolonged economic crisis and low international coffee prices, according to the Association of Indonesian Coffee Exporters (AEKI) on Saturday

AEKI chairman Hassan Widjaja said that during a closed door meeting with the association on Thursday, the minister promised to lobby the minister of finance for revocation of the tax.

"Minister Bungaran supports (our proposal) and promises to discuss the matter with the finance minister in the near future," Hassan told The Jakarta Post.

Hassan said the government had imposed a 1.5 percent revenue tax on purchases by traders of agricultural, forestry and plantation yields, including coffee beans, under a ruling effected on July 18.

Traders or exporters not wanting to see their profits decrease because of the new tax, and who see no possibility of raising their selling price due to the weak price of coffee on the international market, have cut their buying price of coffee beans from farmers, he said.

"Thus, it is the farmers who have ended up bearing the 1.5 percent income tax," Hassan said.

According to Hassan, growers currently sell their coffee beans at between Rp 2,000 (21 U.S. cents) and Rp 2,500 per kilogram, while production costs hover between Rp 3,000 and 3,500 per kilogram.

Coffee prices have been under pressure for years due to a market glut caused by oversupply from the world's largest coffee producing countries Brazil and Vietnam.

Brazil is the world's largest coffee producer, with an output of 1.95 million tons per year, followed by Vietnam with 720,000 tons per year.

Hassan said that the prolonged depression of prices coupled with burdens caused by the income tax ruling, had resulted in several growers in some regions neglecting their coffee trees.

"Should such poor conditions continue, our output and exports will decline in the future, both in terms of volume and quality," Hassan said.

AEKI predicts that Indonesia's coffee exports will slide by 12 percent to 270,000 tons this year, from 310,000 tons last year.

Output was initially targeted at 320,000 tons this year. (dmr)