Tax break for new mining contractors

JAKARTA (JP): The government will reduce income tax on new mining contractors operating under sixth generation work contracts to a maximum of 25 percent, lower than the current highest rate of 30 percent.

"We hope the ruling on the tax incentive will be issued by the finance ministry by end of this month," Director General of General Mining Kuntoro Mangkusubroto said.

He told a gathering of the Indonesian Mining Society on Monday evening that the tax incentive was needed to attract new mining contractors.

Kuntoro said Indonesia was facing keen competition from other countries such as the Philippines, China and Malaysia in attracting foreign companies to tap its mineral resources.

"We also are mulling over extending outright the validity of mining concessions from 30 years to 50 years," he said, but declined to elaborate.

A mining concession is now valid for 30 years but can be extended twice for 10 years each time, he said.

He noted that 74 foreign and domestic companies applied for mining concessions in various provinces.

Kuntoro added that 53 of the applicants had obtained approval in principle from his office while the other 21 were still in various stages of evaluation.

He said the applicants included major foreign mining groups such as Rio Tinto, BHP Minerals, Normandy, Normandy Anglo Asia Group, Ocean Resources N.L. Group. Battle Mountain Group, Aurora Group, Golden Group and Barric Group.

Kuntoro said that 60 of the applicants eyed mining concessions in the eastern region and the other 14 companies in the western provinces.

Royalties

According to Kuntoro, contractors operating under sixth generation work contracts will also be required to pay royalties to the government, the amount of which will depend on the production capacity of each contractor.

Minister Mines and Energy I.B. Sudjana told the same gathering that the formulations being finalized for sixth generation work contracts would also become the basic guidelines for coal mining contracts.

"In the future, coal mining contractors will deal directly with the government and not with state-owned coal mining companies as they do now," Sudjana said.

He also cited government efforts to expedite negotiations with foreign mining contractors and to simplify licensing procedures in the mining industry.

"Under simplified procedures, the processing of mining contracts, from the filing of applications to the final signing, will be completed within six months, compared to one year at present," he said.

"The government wants to attract more foreign investors to the mining sector," he said.(04/vin)