Public were shocked by the findings of Non-Tax Revenue Arrears from mineral and coal business entities which amounted IDR 26.23 trillion, last October 2016. This is mainly contributed by the unresolved arrears from Coal Contract of Work First Generation during 2008-2012, approximately reaching IDR 21 trillion. While the rest are from the holder of Mining permits and Contract of Work that didn’t pay their Non-Tax Revenue obligation (land rent and royalties) given the drop of commodity price.

The Ministry of Mineral and Energy Resources (MEMR) recently released the data showing the decrease of the arrears amounted IDR 5.07 trillion by February 2017. IDR 3.94 trillion is contributed by mining permits holder. While IDR 1.1 trillion is contributed by the Coal Contract of Work and the remaining, IDR 20.636 billion, is contributed by Contract of Work (Investor Daily, 13rd March 2017). While the arrears of first generation of Coal Contract of Work is claimed resolved. However, the settlement mechanism didn’t open to public.

Need to be underlined here that the IDR 21 trillion arrears comes from the business entities that hold their payment of sale of coal proceeds/royalties as the consequence of the payment of Input Added Value Tax, which is not regulated under the contract. In another word, because of these companies have paid taxes out of contract, the companies didn’t want to pay royalties, which is the component of Revenue Sharing Fund that will be distributed to the local government.

If these arrears are stated has been solved, then will trillions of royalties will be distributed to the local government through the Revenue Sharing Fund mechanism this year? Or other mechanism applied?
The problem of arrears is not merely related with the first generation of Coal Contract of Work, there are thousand mining permits and Contract of Work that haven’t settle their debt. The coordination among ministry and the issuance of bill has been conducted by the Directorate of Mineral and Coal Non-Tax. Unfortunately, unclear address and the condition where the mining permits has been revoked are among the main obstacle of this settlement process.

The deadline for the arrears settlement has been set, which is on 31 March 2017. The ultimatum also has been imposed. If the companies didn’t settle their arrears before the deadline, the DG Mineral and Coal will not issue Clear and Clean (CnC) Certificate, Listed Exporter, and Export Agreement Letter, and the harbor master permit. Improvement of mineral and coal revenue system has been sought through the development of electronic non-tax revenue (E-PNBP) system aiming to monitor the compliance of Non-Tax Revenue obligation.

Nevertheless, this doesn’t guarantee the compliance of business entities to comply with the financial obligation. The law enforcement effort should be pursued, in accordance with the Non-Tax Revenue Act no 20/1997. Besides that, the MEMR also need to disclose the data of the arrears also make a blacklist mechanism covering the beneficial owner in order to close their access to invest in mineral and coal mining sector. Without bold action from the government, these problem will recur, and local government as the beneficiary of this revenue will be disadvantaged. [RAW].