The Indonesian Chamber of Commerce and Industry (Kadin) urged the government to revise the mineral-export tax regulation issued by the Finance Ministry recently, arguing that without a change, many miners would have to shut down their operations.
"With the current export tax regulation, many miners will probably shut down their mines because their profit margins will be affected […] due to high export taxes," Kadin chairman Suryo Bambang Sulisto said in a press conference on Saturday.
Suryo said that Kadin basically agreed with taxes on the export of mineral products, but the ministry had to consider how miners would cope with the higher export taxes, which he considered illogical.
According to him, if the government maintained the level of export taxes, many companies would have to cease operations. At least 40 bauxite-mining companies across the country have laid off 50,000 workers and many have reduced production activities since the government banned the export of ore, according to data from the chamber.
"Companies exporting processed iron, for example, will usually earn between 10 percent and 15 percent in profit before tax. If they have to pay 20 percent tax, then they will probably stop exporting due to losses," said Kadin's mineral task force chief Didie Soewondho at the same event.
The government should also consider whether Indonesia really needed to stop exporting all types of mineral ores, he said.
Didie said that the mining industry produced around 24 million tons of iron ore annually, while the domestic market absorbed only 12 million tons of ore per year. "What should we do with half of our production if we don't export it?" he questioned.
With such high export taxes, all mining companies would suffer losses because costs would be far higher, he said. "If they offer higher than the market price, consumers will not buy their products and so, they will suffer losses," Didie said.
The tax regulation, issued following the issuance of the government's regulation on the ore-export ban, beginning this month, obliges companies exporting mineral products to pay export taxes of between 20 percent and 25 percent. The export tax rate will gradually increase every six months until it reaches 60 percent in 2016.
The export taxes are imposed to ensure all mining companies will process mineral ore at local smelting plants in line with the 2009 Mining Law. The requirement became effective on Jan. 12, but miners are allowed to export semi processed mineral products until the end of 2016, albeit with high export taxes.
"The regulation is just not right. It will force many companies to shut down their business and discourage investors," said Suryo.
According to him, the percentage of export taxes should be imposed depending on the purity rate of minerals the mining companies export. "Minerals with higher purity levels should receive lower export tax rates," he added.
The government could, for example, impose a 25 percent tax on companies exporting copper concentrates with less than 20 percent copper content, and 15 percent tax for concentrates with 30 percent copper content.
"With the higher cost of doing business in the industry, we request the government provide good infrastructure and more incentives for national mining companies," Didie said.
"State-owned electricity company PLN has installed a 1,500 megawatt power plant in Gresik, East Java, many companies outside Java need power plants [such as this] to supply their smelters with power," he said.
"We also want to lower the bank loan interest rate. The current interest rate for the industry is 14 percent, while in the Philippines it is only around 5 percent," he said. (koi)
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