Tax break wanted for imported timber

Tax break wanted for imported timber

Rendi A. Witular, The Jakarta Post, Jakarta

The newly established Forestry Industry Revitalization Agency
(BRIK) is urging the government to grant a tax break to local
timber-related industries in the import of logs to maintain
competitiveness of their products in the export market.

BRIK head Soewarni told The Jakarta Post that the agency had
also been talking with the Directorate General of Customs and
Excise to seek ways to smooth the import clearance procedure for
the raw material.

She explained that timber-related industries had been forced
to import logs after the government drastically limited logging
at home in a bid to protect the country's old-growth forests.

"The government urges us to use imported logs to fill the
industry's timber needs and capacity. But the effect is that our
products will not be competitive for export because of the higher
cost," Soewarni said.

She said that imported timber was subject to a 7.5 percent
value-added tax, 10 percent import duty and a 7 percent income
tax.

She added that the industry had often been forced to pay
illegal fees and deal with long bureaucratic delays at the
customs office.

To expedite import clearance, Soewarni said that the agency
had proposed to the Directorate General of Customs and Excise to
allow imported logs to pass through the green lane without being
subjected to a customs inspection.

The timber-related industry has been one of the country's
major export earners. Some 60 percent of export earnings comes
from the plywood industry.

However, from 2000 to 2002, annual export earnings from the
timber industry only totaled about US$4 billion per year on
average, compared to the average figure of $8 billion per year
from 1997 to 2000.

The government's policy to limit logging will drastically cut
the supply of logs, particularly for the plywood industry. This
has forced the industry to look for logs overseas. The government
has also intensified measures to curb illegal logging, which has
further limited the availability of raw material at home.

This year, the Ministry of Forestry has decided to curtail the
supply of timber to only 6.8 million cubic meters from last
year's 12 million cubic meters.

This decision had been strongly protested by the plywood
industry because their huge production capacity of 30 to 40
million cubic meters per year needs a large amount of timber.

The new policy will inevitably force costly machinery to
become idle.

The incredibly huge discrepancy between supply and demand,
which devours wood much faster than forests can grow, is the main
stimulus that leads to illegal logging.