Export tax to become effective in May

The Jakarta Post | April 18, 2012 | Rangga D. Fadillah

The Energy and Mineral Resources Ministry revealed on Tuesday that it would issue a regulation on a mineral ore export tax before May 6.

The ministry’s director general for minerals and coal, Thamrin Sihite, said the government was now intensively discussing the export tax, but as of today, there was no agreement made on the rate.

“We still have to coordinate with many institutions such as the House of Representatives, mining companies and the Indonesian Chamber of Commerce and Industry [Kadin]. No number has been agreed upon yet,” he told reporters after the signing of a memorandum of understanding (MoU) between PT Pertamina Geothermal Energy (PGE) and Geothermal New Zealand (Geonz).

The export tax is a supplement for the 2012 ministerial regulation on a raw material export ban issued on Feb. 6. The regulation says all mining companies should stop exporting raw materials three months after the regulation is enacted.

“We hope before May 6, the regulation on the export tax can be finalized,” Thamrin said.

As reported earlier, mining stakeholders had demanded that the government clarify the ministerial regulation so that it did not create confusion.

Part of the regulation says all companies must stop exporting metal ore by May 6, but in another part, it is said companies can continue exporting as long as they submit comprehensive proposals on how they will process and refine their raw materials in the country.

That regulation is ambiguous because the 2009 Minerals and Coal Law stipulates that the ban of raw material exports will begin in 2014, not in May 2012.

On that ambiguity, Thamrin explained the companies could still export raw materials after May 6 as long as they fulfilled three requirements.

The requirements are that their licenses must be clean and clear (following all legal procedures), they have to sign integrity pacts agreeing that in 2014 they must stop exporting metal ore and lastly, they must submit a comprehensive proposal on whether they want to build their own smelters, make consortiums with other companies to jointly build smelters, or sell their raw materials to smelting companies in the country.

“If mining companies fail to comply with any one of the requirements, we will revoke their export permits,” Thamrin said.

He also revealed that as many as 17 companies had proposed to the government building smelters in Indonesia. Previously, 19 companies had also submitted similar plans to the Energy and Mineral Resources Ministry. With that addition, Indonesia will have a total of 36 new smelters over the next several years.

The Indonesian Mining Association (IMA) had earlier urged the government to invite investors to build smelters in the country because persuading mining companies in Indonesia to form consortiums would be difficult considering technical and financial capability constraints.

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