Export duties may be based on investment

The government is mulling a mechanism to provide preferential export duties for smelter developers based on the progress of their investment, to avoid them being hurt by the planned export tax increase.

Under the new plan, lower export duties would be imposed on companies that have made more progress in their investment, said director general for mineral and coal at the Energy and Mineral Resources Ministry, R. Sukhyar.

The progress would be determined based on six stages of spending, from 0 to 5 percent of overall funds required for investment, 5-10 percent, 10-25 percent, 25-50 percent, 50-95 percent to 95-100 percent, he explained.

“For example, if US$100 million has been spent out of a total investment of $2 billion, it falls under the 5 percent stage,” Sukhyar said on Monday.

Earlier this year, the Finance Ministry issued a regulation requiring mining companies that do not have domestically based smelters and refineries to pay progressively increased export duties, from 20 percent to 60 percent by 2016.

The new study could signal a breakthrough because the Finance Ministry has previously insisted that relaxed export duties would only be granted for mining companies that have shown physical progress in the smelter development. The Energy Ministry, on the other hand, argued that smelter development could not just be judged physically.

“Mining companies could have spent money, for example on feasibility studies or purchasing land, although smelter development cannot physically be seen,” Sukhyar said.

The export duties are expected to boost domestic mineral processing, instead of exporting and exploiting the country’s resources for overseas needs. Indonesia’s abundant resources have made the country a major exporter of minerals such as nickel and bauxite.

But the export tax amounts have been criticized, with industry players considering them unaffordable.

In a coordination meeting held late last month, the government indicated that it would cut the export duties, and that the amount of the new tax would be adjusted based on the construction progress of the miners’ smelting facilities.

However, Deputy Finance Minister Bambang Brodjonegoro declined to reveal the amount.

According to Bambang, if there is no significant progress of smelter development every six months, mining companies must pay in accordance with current regulations, which set export duties at 25 for copper concentrates and 20 percent for other semi-finished products and will be raised every six months until reaching 60 percent in the second half of 2016.

No semi-finished mineral products have been exported since Jan. 12, when the government implemented the ban on the export of minerals. Mining companies must obtain a recommendation from the Energy Ministry before they can resume exports of semi-finished products, which will only be allowed until 2017.

PT Newmont Nusa Tenggara said last week that it would further cut its production and place most of its workers on leave with reduced pay as of June 1 if it was unable to resume its exports.


source : thejakartapost.com