English
Indonesia: Govt Expects Freeport to Follow the Rules in New Contract
TEMPO.CO, Jakarta – Finance Minister Sri Mulyani said that the government will demand FreeportIndonesia to pay higher taxes compared to the previous contract. The issue is one of four points in the contract extension negotiation with the mining company. “We will announce the details later,” she said yesterday.
The government has called on Freeport to follow the prevailing fiscal regime in the new contract. The scheme offers lower income tax compared to the tax rate set in the contract of work—from 35 percent to 25 percent. However, value added tax, sales tax and import duty may rise depending on economic dynamics and company performance.
Data from the Energy and Mineral Resources Ministry shows that Freeport Indonesia gold output rose from 336,000 ounces to 580,000 ounces as of June 2017. Nominal sales have hit 1.45 billion pounds, an increase compared to last year of only 1.05 billion pounds.
However, copper output declined from 354 million to 373 million pounds this year due to strikes held by 4,000 workers. Based on the realized income from copper sales in 2016, Freeport generated US$3.29 billion income or higher compared to US$2.65 billion in 2015.
Yustinus Prastowo, Executive Director of Center for Indonesian Taxation Analysis, said that Freeport’s stance of rejecting prevailing scheme is understandable. The reason is that the company would not be able to set a fixed tax amount to be paid to the government. “They have their own calculation in investment,” he said.
Failing to reach the agreement, the government may still collect higher tax by renegotiating the state revenue with Freeport. Earlier in 2014, the government asked for a royalty increase of copper mine from 3.5 percent to 4 percent and gold from 1 percent to 3.75 percent.
Source: https://en.tempo.co/read/news/2017/08/30/056904419/Govt-Expects-Freeport-to-Follow-the-Rules-in-New-Contract