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Coal producers ease standoff by paying cash advance
Five coal producers accused of holding royalty payments in ransom for tax refunds have agreed to pay the government a total of Rp 600 billion (US$65
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Five coal producers accused of holding royalty payments in ransom for tax refunds have agreed to pay the government a total of Rp 600 billion (US$65.5 million) as a guarantee they will immediately resolve the standoff.
Chairman of the State Development Finance Controller (BPKP) Didi Widayadi said Monday the companies would immediately pay the sum as soon as a special bank account had been opened by the Finance Ministry's director general of state treasury.
"The collateral will not immediately be counted as state funds. It will be held in the bank account until the BPKP completes its audit of the companies' rights and obligations," Didi said.
The BPKP is tasked with calculating the amount of debt owed by the coal companies as well as the amount owed by the government for value-added tax (VAT) refunds.
"An update on the status of the collateral payment will depend on the audit result. Any violation against this agreement will have legal consequences," Didi said.
The five companies are: PT Kideco Jaya Agung, PT Kaltim Prima Coal, PT Arutmin Indonesia, PT Berau Coal and PT Adaro.
The companies will pay the collateral in full or in installments depending on their respective financial conditions.
PT Kendilo Coal Indonesia chose not to agree to the advance payment, citing that it may discontinue production and that it is engaged in talks with the government over its obligation to pay royalties, Didi said.
Last month, the government banned 14 executives from six coal companies from traveling overseas over allegations their companies had evaded royalty payments between 2001 and 2007 amounting to Rp 7 trillion (US$769 million).
The companies are: PT Kideco Jaya Agung, PT Kaltim Prima Coal, PT Kendilo Coal Indonesia, PT Arutmin Indonesia, PT Berau Coal and PT Adaro.
The Finance Ministry recently announced that based on a regulation on state treasury and asset management, it has the authority to imprison the executives without trial unless they show cooperation in paying the royalty bill.
The mining companies have denied any wrongdoing, saying the royalties were withheld to compensate for VAT refunds owed to them by the government.
In 2000, the tax office declared coal products exempt from VAT, meaning coal firms could no longer claim refunds for goods and services purchased to produce coal.
However, the mining companies have argued for their continued entitlement to VAT refunds, citing that their contracts of work, signed before 2000, protect them from future tax policies.
Following negotiations, the government agreed to honor the contracts; allowing producers to claim VAT refunds on the provision they pay royalties.
Currently, BPKP is auditing both parties' obligations.
BPKP's deputy for the supervision of the government's economic agency Binsar H. Simanjuntak said the BPKP typically required one month to complete such audits.
Herman Afif Kusumo, head of the mineral resources committee at the Indonesian Chamber of Commerce and Industry, told The Jakarta Post the government must lift the travel ban as soon as the companies pledged the cash advance.
"The businessmen have demonstrated their goodwill by paying the collateral. The government must lift the ban immediately because all this has a very negative impact on our investment climate," he said.
