Resource royalty tax on timber firms to be raised
Resource royalty tax on timber firms to be raised
JAKARTA (JP): The government is to raise the resource royalty
provision rates imposed on the country's timber companies to 10
percent from 6 percent of timber sales as part of its agreement
with multilateral lenders.
Minister of Forestry and Plantations Muslimin Nasution told
journalists on Monday the 10 percent rate was much lower than
17.5 percent demanded by the World Bank and the International
Monetary Fund (IMF).
"After long and tough negotiations, the World Bank finally
agreed to set the resource royalty provision as high as 10
percent," he said.
But he did not reveal when the new tariff would be made
effective.
The increase in resource royalty provision is one of the
requirements for the disbursement of the Bank's US$1.1 billion
loans for the country.
The World Bank said the current tariff was too low, making the
government's receipts from forest resources too small.
But Muslimin said the tariff proposed by the IMF and the World
Bank was too high and would place a heavier burden on local
timber companies currently facing hardships.
He said the country's concessionaires were facing financial
difficulties due to high interest rates.
Director General of the Utilization of Forest Production
Waskito Soerjodibroto said such an increase in royalty would
raise timber companies' production costs which in the end would
increase prices of logs.
"Timber companies are also obliged to pay various levies. A
sharp increase in their production costs will result in the
increase in prices. It will then make our products less
competitive on the international market," he said.
Eventually, it would encourage illegal timber trade, he said.
In addition to resource royalty provisions and concession
fees, timber companies are still required to pay reforestation
funds to encourage them to manage forests in an environmentally
sustainable manner.
The government introduced the provisions, or rent taxes, on
the country's timber companies from May last year to replace
mandatory forest royalties.
The resource royalty provision is imposed on every cubic meter
of logs felled from the country's forests to comply with the
government's earlier agreement with the IMF on the fund's multi-
billion bailout package.
The resource royalty provision is based on standard selling
prices for wood, which are determined by the Ministry of Industry
and Trade after taking into account prices on the domestic and
international markets.
The rate of the resource royalty provision depends on the type
of product and its origin.
According to Government Regulation No. 59/1998, dated May 5,
1998, forest concessionaires are liable to rent taxes, ranging
from zero to 6 percent of timber sales.
The government currently imposes a tax of 6 percent per cubic
meter on big diameter logs such as meranti and mixed jungle wood
from Sumatra, Kalimantan, Sulawesi, Maluku, Irian Jaya and East
Nusa Tenggara.
A 6-percent tax per cubic meter is also imposed on specialty
wood, such as teak, ebony, and sandalwood. It is also imposed on
every ton of large diameter rattan such as pulut, manau and
tohiti, while a zero-percent tax is charged on small-diameter
rattan such as sega.
The government imposes a 1-percent tax for every cubic meter
of wood with a diameter less than 30 centimeters.
The government charges a 5-percent tax on wood from industrial
forests, such as pine, acacia, balsa and sengon.
The floor prices of big diameter logs such as 'meranti' from
Sumatra, Kalimantan, Sulawesi and Maluku are set at Rp 640,000
(US$75.3) per cubic meter, while those from Irian Jaya, East and
West Nusa Tenggara, Bali and East Timor are Rp 530,000 per cubic
meter. (gis)