Pertamina warned over reports of evading taxes

Nana Rukmana The Jakarta Post Indramayu, West Java

The local administration in Indramayu, West Java, said on Saturday that it sent Pertamina a final warning about its giant processing subsidiary in Balongan evading taxes, adding that the factory would be shut down if the warnings were ignored.

Indramayu regent Irianto M.S. Syafiuddin said that he had sent the last warning on Monday, giving the company one last chance to pay tax on the oil and gas it processed and distributed to Jakarta and West Java.

"Under regional autonomy, Pertamina Processing Unit Four in Balongan is obligated to pay tax to the local administration to finance a development program in the regency," he said.

The letter, of which copies were sent to the home affairs minister, the finance minister and the president of Pertamina, said if the company did not comply with its demands within 21 days, forceful action would be taken. However, the letter did not specify what form the action would take.

The local administration has repeatedly sent letters reminding the company that it has not paid its taxes, but so far the company has ignored them.

"We are still discussing the measures we will take against the company should it fail to heed the warning," he said, citing that the closure of the factory was an option.

He said according to Bylaw No. 25/2002, all mining companies, including the Balongan factory, was obligated to pay tax to the local administration.

The regulation stipulates that the factory has to pay Rp 10 (U.S. 0.001 cents) for every one liter of oil and Rp 5 for every one kilogram of gas it processes and distributes. The factory processes about 51,000 barrels per day.

But Minister of Home Affairs Hari Sabarno once asked for the cancellation of the bylaw's enforcement because it contradicted the law.

Separately, the spokesman for the Balongan factory, Suwandi, dismissed the latest warning, saying that it was only aimed at his company.

"Our company here is only a subsidiary of the one in Jakarta and Pertamina has always paid its taxes to the government," he said. "As long as head office does not send us any instructions, we will not heed the warning."

Suwandi also said Pertamina would comply with Law No. 8/1971 on Pertamina until another was passed in 2005. "Pertamina was established to support the government and everything, including taxes, has been set out in the law and, therefore, the Indramayu administration should also respect the law," he said.