Indonesian mining companies have strongly protested the government’s plan to impose a 25 percent export tax on mineral ores (bijih mineral) and coal, saying that the measure would severely hurt their businesses because they already pay high income tax rates.

The executive director of the Indonesian Mining Association (IMA), Syahrir Abubakar, said in Jakarta on Thursday that the government should be aware that under their contracts of work, miners paid a corporate income rate of between 35 and 45 percent, which was higher than the 25 percent imposed on other companies.
“Some of them pay between 35 percent and 45 percent even though the 2008 Income Tax Law regulates that the tax is only 25 percent,” he told reporters on the sidelines of the launch of the Mining & Engineering Indonesian Exhibition in Jakarta on Thursday.

If the government insists on applying the export tax, it should also declare that all companies pay tax according to prevailing laws (hukum yang berlaku), and not based on their contracts, he said. Currently, contracts of work in the country use the principle of “nail down” in which the taxes paid by miners follow the regulations in force (peraturan yang berlaku) when the contracts were signed, he explained.

“It’s no problem if the government wants to increase its revenue by applying new taxes, but it has to ensure that all the companies are on the same level playing field and are getting the same treatment. If not, this will kill the companies,” Syahrir said.

The government has the power to call all contract holders and inform them that it will apply the prevailing laws in tax payment and therefore the conditions in the contracts have to be renegotiated, he said.

“There’s nothing wrong with the government’s desire to boost tax revenue, but it has to do it in a way that doesn’t (harus dilakukan dengan tidak) endanger the miners,” he said.

He said the government had never invited mining companies to discuss the plan.

Supriatna Suhala, the executive director of the Indonesian Coal Mining Association (APBI), agreed with Syahrir that equal treatment for all miners was necessary. However, he warned that implementing the plan would be difficult if not impossible.

“If the government insists, we have to revise the content of the 2009 Minerals and Coal Law. Our contracts with the government must also be renewed. What we need is equal treatment. Now, companies pay taxes and royalties in different amounts,” he said over the phone.

“In my opinion, this plan will do more harm than good.” 

The discourse over the export tax first began following Industry Minister MS Hidayat’s statement that the policy was aimed at preventing companies overexploiting the county’s mineral resources and selling it in ore form without thinking about the future of the nation’s reserves.

The planned tax will supplement the government’s decision to ban mineral ore exports in 2014, which is mandated by the 2009 Minerals and Coal Law and a 2012 ministerial regulation.

When asked about the export duty, the Energy and Mineral Resources Ministry’s director general for minerals and coal, Thamrin Sihite, declined to comment.