Tax hinders growth of local shipping lines

Albeit benefiting from the cabotage principle that requires all vessels operating in Indonesian waters to be domestically owned, local shipping companies are still struggling to grow their businesses, especially when it comes to the export-import market.

Indonesian National Ship Owners Association (INSA) chairwoman Carmelita Hartoto said that Indonesian ships were not as competitive as foreign shipping lines in the business due to the heavy burden of paying 10 percent value-added tax (VAT).

Carmelita said that the tax among foreign shipping lines was only 2 to 3 percent, allowing them to be more focused on expanding their business.

Besides VAT, she said that the companies were also burdened by the 10 percent tax on locally bought fuel that they had to pay. The high tax and fuel costs result in high prices for clients.

According to the association, the country’s shipping industry lost around US$4.14 billion in potential income from shipments of coal, one of Indonesia’s main export commodities, which totaled 230 million tons in 2011.

Moreover, she said that Indonesia’s contribution to the world’s total dead weight tonnage (DWT), which represents shipping capacity, was considered too low despite the country’s maritime status.

Based on United Conference on Trade and Development (UNCTAD) data in 2011, Indonesia’s DWT was only 0.8 percent of total global freight, below neighboring countries like Malaysia (1.12 percent) and Singapore (2.53 percent), she said.

In a separate interview, the Transportation Ministry’s sea transportation director general, Leon Muhammad, said the ministry had discussed the tax-cut proposal with the Finance Ministry and was awaiting a decision.

“We have communicated the problem with the Finance Ministry and are waiting for the final decision because the tax cut is strongly related to state income,” he told The Jakarta Post.

Last week, publicly listed shipping company PT Humpuss Intermoda Transportasi (HIT), which is connected to the youngest son of the late former president Soeharto, Hutomo “Tommy” Mandala Putra, announced that it was assessing the impact of the bankruptcy of its Singapore-based subsidiary, Humpuss Sea Transport Pte Ltd (HST).

The Singaporean High Court declared HST bankrupt on Jan. 20.

The court ruled in favor of Linsen International limited, which had filed a bankruptcy petition against HST for failing to pay for chartered ships.

HIT holds 100 percent shares in HST, which operates a ship rental business. HIT has 41 vessels, comprising oil tankers, tugs and barges.

In addition, last month, the nation’s largest oil and gas shipping firm PT Berlian Laju Tanker (BLTA) decided to freeze payment on $418 million in debt due this year — out of the total $1.9 billion outstanding — in a move that could lead to massive restructuring or asset sales to avoid default.

BLTA president director Widihardja Tanudjaja said in a statement that the company’s business and financial position had been impacted by the global economic downturn, rapid global fleet growth in the past few years that resulted in lower freight rates, higher bunker fuel costs and other operating costs.

“We have met with [officials of] the Office of the Coordinating Economic Minister and the Transportation Ministry over this issue,” she said.

She said she was expecting VAT to be waived for Indonesian ships within two months. (nfo)