TEMPO.CO, Jakarta – When the deputy chairman of the House of Representatives’ (DPR) budget council, Said Abdullah struck the gavel at a meeting inside the legislature building last week, a compromise appeared within reach. Said and other members of the budget council agreed that the target of non-tax receipts (PNBP) from the oil and gas and coal sectors needed tobe reduced. “What more can be done? It cannot be improved on any further,” said Said after the decision was made.
It was decided at the meeting that the amount of non-tax state receipts for mining in the amended draft national budget (RAPBN-P) should be lowered to Rp30.1 trillion-down from the initial target set at the start of the year, which was Rp40.8 trillion. In the financial note to the 2016 draft state budget, the executive branch had set a non-tax receipts target from general mining at just Rp16.54 trillion. This is much less than the figure agreed on by the budget council. The reason cited was that business in this sector was sluggish. “Prices are down and demand is also down,” said Minerals and Coal Director-General Bambang Gatot Ariyono.
However, information from an official at the energy and mineral resources ministry said the reduction in the target was not just due to the slump in the mining business. “Collecting royalties has not been as easy as we initially thought. There are many obstacles,” he said.
The official said that the directorate of mining had already applied maximum measures to reach the initial target of Rp40.8 trillion. One of them was taking steps to optimize receipts from royalties and to expedite the process of settling unpaid debts and other fees that mining companies owe the government.
The amount of these unpaid royalties and fees is no joke. At energy sector coordination and supervision meetings held in some provinces, Bambang, the director-general, mentioned these mining company debts to the government at least four times.
The most recent mention was at a meeting held in Palembang on May 11, during which Bambang showed a presentation that clearly listed the total unpaid amount of business players in the country, amounting to Rp25 trillion. “This figure includes coal, minerals and mines in the provinces,” said Bambang.
According to data from the energy and mineral resources ministry, Rp17 trillion is the amount of unpaid collections on 74 coal contracts of work (PKP2B) and 35 mining business permit (IUP) holders over the past few years.
One mining observer who often attends coordination meetings in this sector said the most complicated matter that directorate officials often lamented is the collection of royalties from the holders of PKP2B contracts. “The majority of those collection receivables are for PKP2B,” he said.
Those coal miners, according to the source, were reluctant to pay the bills, saying that their tax restitution had yet to be paid back by the government. “They don’t want to pay royalties if the government has not yet returned their tax overpayments,” said the source.
Bambang was reluctant to give a definitive answer when he was asked to confirm this issue. He said that the ministries of energy and finance were attempting to coordinate to settle this problem, which had been growing since 2007. This has gone on, according to Bambang, because there were different contracts for each business player.
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One coal company listed as not having paid royalties to the state is Adaro Indonesia. This company is on record as owing Rp1.23 trillion in royalties, the highest amount out of the 74 PKP2B contracts on the list.
Febrianti Nadira, Adaro Energy corporate communications chief, denied reports about the business of the company’s subsidiary. “Adaro has paid its royalties according to the PKP2B and is not holding back any payment from the government,” she said.
Febrianti said that the withholding of royalties applies to third-generation PKP2B contracts. Adaro’s, according to Febrianti, falls under the first generation of PKB2B contracts. “We have listed it all openly in a financial report,” she said. “If we had not paid the royalties, we would definitely be unable to export (our commodities).”
Hendra Sinadia, deputy executive director of the Indonesian Coal Business Association (ICMA), confirmed reports that some of the ICMA members had not paid royalties due to unfinished tax issues.
Hendra explained that the problem began when Government Regulation No. 144/2000 was issued. This regulation stated that coal was not among the taxable items, which contravened the provisions of the third-generation PKP2B contracts, most of which were signed in 1997. These contracts say that coal is taxed according to the laws that were then in effect, namely the value-added tax.
This government regulation, said Hendra, led to different interpretations among the tax authorities. As a result, some regional tax office contractors agreed to tax refunds. However, others refused to provide the refunds, leading to uncertainty among the business people. “The amounts are large. There is even one company whose refund payments could reach Rp1 trillion,” said Hendra.
Hendra claimed this uncertainty took place because it was allowed to drag on for years. The government failed to ensure legal certainty and equal treatment to business players. This delayed obligation on the part of the government coincided with the obligation of companies to pay royalties. “The article on setoffs was used by business players,” said Hendra. Business players asked that their obligation to pay royalties be reduced by the government’s unmet obligations.
Aryanto Nugroho, manager of advocacy and the Publish What You Pay network, regrets that mining contractors held back royalties as a result of delayed tax refunds. “This wouldn’t have happened if the government had been resolute. Moreover, the channels for (payment of) tax receipts and royalties are different,” said Ary.
Hestu Yoga Saksama, director of guidance, service and public relations at the taxation directorate-general, said that his office was discussing the tax dispute. However, he emphasized that his office had a clear legal basis for withholding the tax refunds of business players.
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From the state receivables of Rp25 trillion, there are unpaid collections from contract of work holders and mining business permit holders in the provinces. Obligatory payment of fees from 35 contract of work operators that have been delayed as of May 4 comes to about US$21 million. Newmont Nusa Tenggara is listed as having the largest unpaid payment of US$16 million, or about Rp212.96 billion.
Newmont spokesman Rubi Purnomo rejected reports that his company was delinquent in paying royalties. “That is untrue,” he said. According to Rubi, as of March last year, Newmont had been paying its Rp34.7 trillion obligation for taxes, royalties and other fees since the start of operations up to December 2015. “Last year, we paid royalties of Rp1.04 trillion.”
Indonesia Mining Association Executive Director Syahrir A.B. is aware that many contract of work companies were reported to have unpaid royalties and fees. “There has been a difference of interpretation between the government and the business people,” he said.
According to Syahrir, this difference occurred after Government Regulation No. 9/2012 was issued. This regulation set the percentage increases of royalties. The government asked that the royalty on gold be increased to 3.75 percent, on silver to 3.25 percent and on copper to 4 percent. The government regards this as a form of receivables that contractors have failed to pay. “However, those increases were one-sided because renegotiations were not over yet,” said Syahrir. He said changes to contracts of work must be agreed to by both parties.
Said Didu, a special staff member of the energy minister, said that there were many challenges in collecting non-tax receipts in the mining sector. This excludes the collection of receivables from some IUP companies, which have reached Rp7 trillion. “There is a great potential for receipts but they are difficult to collect, especially in the provinces, because we lack our own means of enforcement,” he said.
One measure being attempted by the ministry at this time is to form a new directorate that specializes in handling non-tax revenues. “It has been approved and there will soon be an auction to select its director,” said Bambang.
He hoped the new directorate will make the job of collecting non-tax revenues easier, more focused and faster in overcoming obstacles.
Gustidha Budiartie, Ghoida Rahmah, Destrianita Kusumastuti
Source: Tempo (Published on June 19, 2016)