Ministry says no to regions' demand for higher revenue
Ministry says no to regions' demand for higher revenue
The Jakarta Post, Jakarta
The Ministry of Finance has rejected requests from oil
producing regions for a greater portion of revenue from the
commodity as it would only further widen the income gap among the
regions.
"The ministry still wants the 85:15 proportion. It's still
being discussed, but our position is clear; we will stick with
the existing regulation," Director General of Financial
Institutions at the ministry Darmin Nasution said on Friday.
He was referring to the current revenue-sharing mechanism
outlined under the 1999 law on fiscal balance between the central
and local governments, which states that oil-producing provinces
get 15 percent from the oil revenue, with the remainder going to
the central government.
An exception is made, however, for Aceh and Papua -- which are
entitled to a much higher share at 85 percent -- given their
special autonomy status. Under the same law, provinces will get
30 percent of revenue from natural gas and 80 percent of revenue
from forest resources and fisheries.
Regions are entitled to a portion of revenue obtained from
local natural resources following the introduction of the
Regional Autonomy Law in 1999, which grants regions greater power
in managing their economic affairs.
The demand for a higher portion of the revenue came as the
government is currently in the process of revising the fiscal
balance law and the Regional Autonomy Law.
With the oil prices currently soaring at above US$40 a barrel
-- way above the 2004 state budget assumption of US$22 a barrel,
regions are using the momentum to seek a much larger oil revenue.
Most of the resource-rich regions are seeking an increase in
their portion to at least 30 percent. Riau province, which
produces a significant portion of the country's oil output of
around 1 million barrels per day, has even asked for a 40 percent
portion of the revenue.
They argue that under the Regional Autonomy Law, regions are
entitled to a significant percentage of return on assets or
profits generated from their own areas.
But Darmin said that higher revenue would be unfair to non
oil-producing regions; "The higher the proportion given to
certain regions, the more unfair it would be to others."
He added that the revision of the law on fiscal balance was
aimed at resolving the current income gap among regions, a
problem which had forced many regions to be overly aggressive in
taxing the business sector and thus creating an unfavorable
investment climate.
He also argued that the central government should be entitled
to a much higher revenue portion as it also had to cover the
costly fuel subsidy and other expenses such as for defense and
national programs.
"So, why should it (current revenue split) be changed?" he
said.
Meanwhile, unconfirmed reports said that the Ministry of
Internal Affairs had agreed to the regions demand for a higher
revenue split.
The Jakarta Post, Jakarta
The Ministry of Finance has rejected requests from oil
producing regions for a greater portion of revenue from the
commodity as it would only further widen the income gap among the
regions.
"The ministry still wants the 85:15 proportion. It's still
being discussed, but our position is clear; we will stick with
the existing regulation," Director General of Financial
Institutions at the ministry Darmin Nasution said on Friday.
He was referring to the current revenue-sharing mechanism
outlined under the 1999 law on fiscal balance between the central
and local governments, which states that oil-producing provinces
get 15 percent from the oil revenue, with the remainder going to
the central government.
An exception is made, however, for Aceh and Papua -- which are
entitled to a much higher share at 85 percent -- given their
special autonomy status. Under the same law, provinces will get
30 percent of revenue from natural gas and 80 percent of revenue
from forest resources and fisheries.
Regions are entitled to a portion of revenue obtained from
local natural resources following the introduction of the
Regional Autonomy Law in 1999, which grants regions greater power
in managing their economic affairs.
The demand for a higher portion of the revenue came as the
government is currently in the process of revising the fiscal
balance law and the Regional Autonomy Law.
With the oil prices currently soaring at above US$40 a barrel
-- way above the 2004 state budget assumption of US$22 a barrel,
regions are using the momentum to seek a much larger oil revenue.
Most of the resource-rich regions are seeking an increase in
their portion to at least 30 percent. Riau province, which
produces a significant portion of the country's oil output of
around 1 million barrels per day, has even asked for a 40 percent
portion of the revenue.
They argue that under the Regional Autonomy Law, regions are
entitled to a significant percentage of return on assets or
profits generated from their own areas.
But Darmin said that higher revenue would be unfair to non
oil-producing regions; "The higher the proportion given to
certain regions, the more unfair it would be to others."
He added that the revision of the law on fiscal balance was
aimed at resolving the current income gap among regions, a
problem which had forced many regions to be overly aggressive in
taxing the business sector and thus creating an unfavorable
investment climate.
He also argued that the central government should be entitled
to a much higher revenue portion as it also had to cover the
costly fuel subsidy and other expenses such as for defense and
national programs.
"So, why should it (current revenue split) be changed?" he
said.
Meanwhile, unconfirmed reports said that the Ministry of
Internal Affairs had agreed to the regions demand for a higher
revenue split.