Put Income Tax Rate on Table in Mine Talks: Analyst

By webadmin on 08:36 am Sep 11, 2012
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Tito Summa Siahaan

The government should not focus on raising miners’ royalty fees as contracts are renegotiated and should instead direct its attention to matters such as the income tax rate, analysts say.

Rudi Rubiandini, the deputy minister for energy and mineral resources, said on Sunday that the government was aiming for royalty payments of 10 percent of revenue, compared to the 2 percent to 6.5 percent tariff set in the 2003 regulation for new mining permits.

Some large overseas-controlled miners, including Freeport Indonesia and Newmont Nusa Tenggara, pay a 1 percent royalty to the government in accordance with their contracts, which predate the latest regulation.

The government is renegotiating their contracts, along with those of other miners, to increase the state’s benefit from their operations.

Marwan Batubara, the executive director of think-tank Indonesian Resources Studies, gave cautious support to the government’s latest proposals.

“The 10 percent rate is good, and the government deserves to be praised should they manage to achieve it,” he said on Monday, expressing doubt it would materialize.

The government should not give in to miners’ demands to reduce payments, he said, adding that “royalty payments are very small compared to taxes.”

The current corporate income tax paid by miners including Freeport Indonesia is 35 percent, higher than the 25 percent rate for non-resource companies.

Pri Agung Rakhmanto, the executive director at Reforminer Institute, another think-tank, said the royalty rate should only be a minor matter in the ongoing contract renegotiations.

He said the government should prioritize other matters in the national interest, such as increasing its ownership of and participation in large mines that are now controlled by foreign companies.

Spokesmen from Newmont and Freeport Indonesia declined to comment on the royalty payment issue.

Freeport Indonesia president director Rozik B. Soetjipto stressed that “there are no new developments” in ongoing renegotiations discussions.