Export Tax Will Not Apply to Coal: Minister (June 09, 2012) - http://www.thejakartaglobe.com/business/export-tax-will-not-apply-to-coal-minister/523031

Responding to recent uncertainty about whether Indonesia will impose an export duty on coal and try to curb exports, the minister of energy and mineral resources said on Thursday that the government did not intend to do either.

“I have to confirm to all coal mining companies, there is no such plan to impose an export tax for coal. Who said there was?” Jero Wacik told reporters at the State Palace on Thursday.

Jero also denied that the government intended to curb coal exports, saying the “exports will keep on going, but at the same time, domestic stock must be secured.”

Coal miner stocks received a double gut punch on the stock exchange on Monday, experiencing losses after Jero was quoted by local media as saying that Indonesia aimed to impose an export duty on coal and curb exports. The industry was also hit by massive selling pressure as investors worried about economic developments in Europe.

On the Indonesia Stock Exchange, the mining sector dropped almost 8 percent that day. Bumi Resources, the country’s biggest coal miner by tonnage, saw its stock fall 14 percent to Rp 1,220 on Monday, while state-controlled coal producer Tambang Batubara Bukit Asam’s shares slid 12 percent to Rp 13,250.

Supriatna Suhala, the executive director of the Indonesian Coal Mining Association (APBI), said he was upbeat that the government would not follow through with a move to curb exports, which he said would “strangle the neck of coal miners.”

He said coal miners had contracts of work that differed in terms royalties and taxation schemes “which a ministerial decree can never alter” because they were backed by the law and government regulations, which rank higher.

Supriatna said that major coal miners that secured the first generation of contracts, such as Adaro Energy, Kaltim Prima Coal, Arutmin Indonesia and Indo Tambangraya Megah, were already paying 13.5 percent royalties to the government from their gross revenue.

Those companies have also reportedly been hit with up to a 45 percent corporate income tax from their profit.

“If you want to tax them more, that’s so irrational, and then how would they live?” Supriatna said. “Such a taxation policy applied to these miners is already the highest in the world.”

The APBI is a group of the country’s coal miners and mining services companies, including Adaro Energy, Kaltim Prima Coal, Arutmin Indonesia, Berau Coal and Tambang Batubara Bukit Asam.

Supriatna reiterated his comment on Monday that if the government wanted to apply more taxes, then it needed to streamline all the rulings affecting the country’s coal industry before imposing any new regulations.

Indonesia recently imposed a 20 percent tax on exports for 65 ore minerals, including nickel and gold, but it left coal off the list. The tax was aimed to encourage producers to build smelters and stimulate investment in the downstream sector.

Regarding the government’s intention to secure domestic demand, Supriatna said coal mining production was already bound by a domestic market obligation to allocate a certain amount of output for sale on the local market.

Dileep Srivastava, a director at Bumi Resources, one of Indonesia’s largest coal miners, agreed with Supriatna. He said that two of its coal mining subsidiaries, Kaltim Prima Coal and Arutmin Indonesia, held first-generation contracts of work and already paid a corporate tax of 45 percent and royalties of 13.5 percent.

He claimed Bumi was among the highest-taxed companies in the world, paying far more than its counterparts in much of the metals and resource sector.

Speculation that coal would be included among the minerals charged with export duties began back in April, when Industry Minister M.S. Hidayat came up with proposal to impose a 25 percent tax on mining exports this year and a 50 percent tax for next year.

He said that with the move, the government aimed to take in more revenue from the nation’s natural resources sector, as well as create more jobs at domestic processing plants.

Indonesia is one of the biggest coal exporters in the world. It is expected to ship out about 300 million tons of coal this year to buyers around the world, including in key countries such as China, India, Japan, South Korea and Taiwan.