New tax will reduce RI wood's competitive edges

New tax will reduce RI wood's competitive edges

JAKARTA (JP): The Association of Indonesian Forest
Concessionaires (APHI) expressed concern on Thursday that the
planned progressive levies to be imposed on timber companies will
make Indonesian wood-based products less competitive in
international markets.

APHI chairman Adi Warsita Adinegoro said the levies should be
set at a level which would not increase the cost of logs and thus
also the price of wood-based products.

"Basically we support the government's plan (to impose
progressive levies), because the idea is beneficial to the
promotion of a people-oriented economy.

"But the rate of taxation should be set at a level which will
not reduce our competitiveness in the international market," he
said.

APHI's treasurer, Zein Mansyur, said several main buyers of
Indonesian wood products, such as Japan and the United States,
currently imposed higher import duties on Indonesian wood-based
products, because these products controlled the biggest share of
the market in those countries.

"The import duties imposed on our wood-based products by the
U.S and Japan are higher than those imposed on our rivals
Malaysia and Brazil. In some ways it has already made our
products less competitive than Malaysia's and Brazil's," he said.

He added that Indonesia controlled over 75 percent of the
market for wood-related products in the U.S and Japan.

Zein also said that the government should find the right time
to start imposing the new levies to avoid further burdening
timber companies during the economic crisis.

"I'm not saying that it would be ill-timed to impose the
levies now, but during the economic crisis there are many timber
companies facing financial difficulties.

"We are still negotiating with the government on the rate and
timing of the progressive levies in order to reach a win-win
solution," he said.

He also warned that the new levies could lead to scarcity of
timber in the domestic market, which would lead to declining
exports and foreign exchange earnings from timber and related
products.

The government's plan to impose progressive taxes on the
country's timber companies was announced by Minister of Forestry
and Plantations Muslimin Nasution after his meeting with
President B.J Habibie last week.

The tax will be imposed on existing timber companies whose
concession areas exceed the maximum limit set by the government
in a new decree issued by the minister of forestry and
plantations late last year.

Under the new regulation, each concessionaire will be limited
to a maximum of 100,000 hectares in a province. Although
concessionaires will be allowed to manage forests in other
provinces, the total area under their management cannot exceed
400,000 hectares nationwide.

When the concession rights expire, the government will take
over the areas and auction them according to terms set by the
International Monetary Fund (IMF).

Most of the existing logging concessions owned by large timber
companies will not expire for another 10 years.

Muslimin said the tax was mainly designed to speed up the
process of relinquishing the big timber companies' control of the
country's forests, adding that the government did not want to
just cut their concession areas if the contracts had not yet
expired.

He said the levies would be imposed on reforestation fees,
forest royalties, levy and grant fees and performance bonds.

The government, he said, would introduce a system of
progressive levying so that businesspeople controlling areas
larger than the official limit would pay fees, royalties and
other expenses at a higher rate than companies controlling
smaller forest areas.

Adi said forest concessionaires welcomed all government moves
to give common people greater access in managing forest
resources, which for a long time were concentrated in the hands
of big timber groups.

"But the moves should not make us lose our market share," he
said.

However, Zein said the government should establish a more
friendly system for the timber industry, saying it is the sector
that will lift the country out of the current economic trouble.
(gis)