No tax relief for PLN: Finance Ministry

The Jakarta Post, Jakarta

The Ministry of Finance announce on Tuesday that it had rejected a request for a tax holiday this year from state-owned electric company Perusahaan Listrik Negara (PLN), because tax proceeds from the company have already been included in the calculation of the 2003 state budget revenue.

"There won't be any (tax) relief. PLN has to fulfill its tax obligation as it has been stated in the budget," Anggito Abimanyu, the ministry's head of fiscal analysis, said on the sidelines of a hearing with the House of Representative's budget committee on Tuesday.

Anggito said PLN would have until December to pay its fair share.

"PLN has to settle up by the end of the year. The company has not made any (payments) so far."

PLN made the request due to major financial difficulties that it claims were brought about by over-investment in infrastructure.

PLN officials have said that without a tax relief, it would be difficult for the company to meet further investment targets, especially as it had not been allowed to raise the electricity price to consumers between now and next year due to massive street rallies earlier this year and unwillingness by those parties in power to raise the rate and risk unpopularity ahead of the 2004 general elections.

The company has begged off its tax obligation especially in relation with recent asset revaluation, which on paper, increases its total asset value, and is thus subject to more income tax. The asset revaluation strategy is part of efforts to clean up PLN's finances, especially relating to long-term projects which began before the 1997-8 rupiah devaluation.

After revaluation, it shows an increase in PLN assets to Rp 197 trillion (US$23.45 billion). This has resulted in a rise in tax payment to Rp 11.5 trillion.

Anggito said that the company's increase in asset values, meant more tax payments.

"This applies to all state-owned enterprises, not just PLN. So, the company still has to pay," he asserted.