Bisnis Indonesia - Bisnis.com

JAKARTA: The government may tighten regulations on mining taxes by involving the directorate general of taxation at the finance ministry in renegotiating mining contracts of works and profit-sharing scheme.

Tax authority has the competence to interprete renegotiation contracts, particularly on the obligation of mining companies to the government, said  Mekar Satria Utama, the head of Major Taxpayers division at the directorate generale of taxation.

“If tax authority is involved, it will give clear explanation related to tax issues. After all, the renegotiation aims at reviewing the mining companies obligation to the government,” he said over the weekend.

The government has said earlier it sought to renegotiate existing mining contracts of works as it want to improve revenue to the state.

Tax authority has submitted the proposal to be involved in renegotiation of mining contracts and profit sharing. The move  is in line with the Law on Mineral and Coal.

Chief Economic Minister Hatta Rajasa said the government is drafting a bill on the renegotiation with miners that hold contracts of works which will include contract extension, the obligation to process raw material in the country's smelters, mining concession and divestment obligation for foreign investors that hold full-ownership in local mining firms.

He added that renegotiation process should give benefit to both the government and mining companies.
 
In profit-sharing from oil and gas, the government has been receiving less than expected from many foreign companies, as a special tax agreement has enabled companies to pay lower income tax.

The government is entitled to receiving 85% of the proceeeds from oil and gas production, while the remainder goes to the related companies.  However, the tax treaty has reduced the government's share.

Suspicious
 
Some mining companies might have enjoyed profits allegedly obtained unfairly because they were not transparent as their production data submitted to the government was unclear, said Director General of Taxation Fuad Rahmany

Mining companies are supposed to get profit according to risk and capital, said Fuad.

So far, state-owned mining companies have adhered to the regulation, said Fuad in a seminar on coal mining over the weekend while there is no celar regulations for private-owned mining companies. (T04/NOM)