Minister voices support for AEKI tax proposal

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)