Supreme Court annuls regulations on coal tax

Supreme Court annuls regulations on coal tax

Fitri Wulandari
The Jakarta Post
Jakarta

The Supreme Court has nullified two government regulations on
taxation in the coal mining sector, a move that may increase
investment in the sector.

According to a press release issued by the Indonesian Coal
Mining Association (ICMA) on Wednesday, the Supreme Court has
annulled Government Regulation No. 144/2000 on value-added tax
(VAT) and Government Regulation No. 65/2001 on vehicle tax
because they contradicted the law.

Government Regulation No. 144 exempts coal from 10 percent
VAT. This has long been protested by coal producers as they have
to pay VAT when purchasing equipment and other items necessary
for production, while they cannot pass this burden on to coal
buyers as the commodity is exempted from the tax.

The Supreme Court said the regulation was against Law No.
18/2000 on VAT and luxury tax, which does not mention coal as
goods exempted from VAT.

VAT is levied on goods when there is added value in the
process of production.

Meanwhile, Government Regulation No. 65/2001 stipulates that
vehicles used in mining operations are subject to the same tax
imposed on vehicles operating on public roads.

The Supreme Court opined that vehicles operated in remote
mining areas should not have vehicle tax imposed on them because
they are not used on state highways.

ICMA chairman Jeffrey Mulyono said the association welcomed
the ruling by the Supreme Court and hoped the Ministry of Finance
would amend the two regulations.

He said many coal companies had been reluctant to expand their
mining business here partly because of the two controversial
regulations.

Indonesia's coal production is expected to increase from 109.3
tons in 2003 to 119.7 million tons this year on the back of
stronger global and domestic demand. Indonesia's coal exports
account for up 70 percent of production.