* Finmin adds to industry min support for export tax
* Tax may only be applied to low calorie coal-analyst
* Tax is latest proposal to worry miners in Indonesia
By Adriana Nina Kusuma and Neil Chatterjee
JAKARTA, April 13 (Reuters) – Indonesia will issue a mining
export tax regulation by June, the country’s finance minister
said on Friday, showing the government is pushing ahead with a
policy that is worrying resource firms.
Government officials in Indonesia, the world’s top exporter
of thermal coal and refined tin, have said a tax of 25 percent
on mining exports is being considered for this year and a tax of
50 percent for 2013.
“We want to be clear about which products and commodities
will have the export tax imposed,” Agus Martowardojo said,
adding that government discussions were ongoing and more details
would be released soon.
The G20 member wants to develop its mining industry, create
jobs and turn itself into a producer of higher-value finished
goods from an exporter of raw materials as it seeks to become
one of the world’s ten biggest economies in the next decade.
The tax proposal would add to a recent series of rules
supporting a 2009 mining law aimed at increasing state revenue
from a sector that contributes nearly 12 percent of GDP in
Southeast Asia’s top economy, at a time of high metal prices.
Indonesia should quickly impose an export tax, the industry
minister said on Thursday, though it is not clear that all key
government departments involved agree on a measure analysts say
could scare off new investment.
“We are mulling over its merits,” Gita Wirjawan, Indonesia’s
trade minister and investment chief, told Reuters, adding that
he would discuss the measure with his industry and mining
counterparts.
HIGHER TAX
Analysts said support from the industry and mining ministers
would count for little if the policy was not also backed by the
finance minister, given he would be responsible for setting
export taxes together with the trade minister.
A higher tax could get Martowardojo’s support because it
would help to contain a widening budget deficit this year. The
government’s failed attempt to hike fuel prices last month means
it faces a burgeoning subsidy bill, said Kevin O’Rourke, a
Jakarta-based risk consultant.
“Advocates of the tax may attempt to generate support for
the measure among parliamentarians, and the proposal could
conceivably escalate into a high-profile issue that places the
finance minister under pressure,” said O’Rourke.
Indonesia’s tax revenues are low by international standards,
at around 12 percent of GDP, a nd economists say the country
needs to raise them to generate funds to build infrastructure.
Industry sources say companies holding long-standing
Contract of Works such as top coal miner Bumi Resources
pay high corporate tax rates of around 45 percent and
royalty charges of around 13 percent. However, firms say these
contracts protect them from any new rule changes in the sector.
Firms holding newer mining licenses pay lower tax rates and
royalty charges of around 7 percent, but are at risk from rule
changes.
O’Rourke said there were indications that policymakers were
considering applying an export tax for coal only to low-calorie
fuel, with a heating value of under 5,700 kcal/kg.
The government has previously said it wants to ban exports
of low-grade coal, but has backed down after industry complaints
because commercial technology to upgrade it does not yet exist.
Other new regulations already issued by the government to
increase mining revenue include a ban on unprocessed metals
exports by 2014 and changes to rules on foreign mine ownership.
Stringent regulations are likely to drive up the cost of
mining in Indonesia but the outlook for the sector remains
stable, ratings agency Standard & Poor’s said on Thursday.
“It will not harm the certainty of the business climate in
the mining sector,” Wirjawan, a former banker, said about the
tax plan.
