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Government puts high hopes in revised tax regulation
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Back to work: Pertamina Hulu Energi West Madura Offshore (PHE WMO) workers are moved in a personnel basket from a ship to the company’s oil rig off the coast of Madura Island in East Java. (JP/Wahyoe Boediwardhana)
T
he government is putting high hopes in a revised tax regulation to boost oil and gas exploration activities and revenue from the sector in years to come.
The Joko “Jokowi” Widodo administration is currently finalizing the revision of Government Regulation (PP) No. 79/2010 on cost recovery and tax treatment for firms working in the upstream oil and gas industry, which is expected to lure contractors to conduct exploration activities through various incentives.
For instance, during the exploration phase, firms will be exempted from the requirement to pay import value-added tax (VAT), domestic VAT, import duty and property tax (PBB). Meanwhile, during the exploitation phase, firms will have the opportunity to avail of similar waivers, but only if their projects meet the government’s economic valuations.
(Read also: Oil and gas lifting, production slightly exceeds 2016 expectations)
“As there will be many incentives offered through the revised regulation, which we expect will eventually boost exploration activities in the country,” Energy and Mineral Resources Ministry secretary-general Teguh Pamudji told The Jakarta Post on Wednesday.
That way, he said, the government could gradually increase the country’s oil and gas production and lifting, or ready-to-sell production, and increase state revenue from the sector.
From January to November 2016, the government invested US$10.43 billion in the upstream oil and gas industry, in which investment for exploration activities only accounted for 7 percent of the total figure. In 2017, the government plans to increase total investment to more than $13 billion. (bbn)
