Friday, August 11, 2006

VAT 10% on coal

Indonesia's tax office proposes the value added tax (VAT) on coal, reported today. Erwin Silitonga, director at tax office, said with the VAT, coal exporters could claim tax refund. The proposal has been included in the new tax bill to be discussed soon by Indonesian parliament and is expected to implement early next year. Currently, coal is non-taxable goods and only charged with 5% export tax. Any comments?

Initially coal was categorized as taxable goods in which producers paid VAT and claim the refund. But government changed the policy in 2000 and put coal as non-taxable goods. As a result, they can't claim the tax refund. The new policy would likely benefiting coal producers of the first generation of working contracts with Indonesian government such as KPC, Arutmin or Adaro.
But claim tax refund in this country is a hell of a pain. You're lucky to get the refund in months. It cost companies huge 'dead' money. So, hold your smile!




Anonymous Anonymous said...

The only effect of this coal-as-VATable-goods to 1stG coal mining like KPC/Adaro is the certainty that the VAT can be refunded. These 1stG companies are protected from any taxes not regulated by their contract agreement with Govt, that's why they insist to deduct non-refundable VAT from royalties.
Companies from later generation of coal agreement are in better position to benefit from this new regulation because VAT will be refundable, i.e. reducing cost by up to 10%.

August 11, 2006 11:20 PM  
Anonymous Anonymous said...

Instead of figuring out new ways to tax Adaro/KPC etc., perhaps more efforts should be concentrated on getting the illegal miners to pay anything - royalty, tax, whatever. The Indonesian people are missing out due to illegals, but the efforts are always at the soft targets like major established companies.

August 14, 2006 5:33 AM  

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