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Watchdog Urged Gov of Indonesia to Resolve Mining Non-Tax Revenue Arrears

Jakarta-Publish What You Pay Indonesia supports Directorate General (DG) of Mineral and Coal, Ministry of Energy and Mineral Resources to crack down mining companies which would not pay off the non-tax revenue arrears, either mining permits holder, Coal Contract of Work, and Contract of Work. MEMR is urged to be bold to impose special treatment, such as formulation of the black list of company, business permit revocation, and law enforcement.

National Coordinator of PWYP Indonesia, Maryati Abdullah said that those delinquent mining business entities shall be sanctioned and also included in the blacklist. The blacklist scheme can be promoted through coordination, cooperation, and exchange information with the DG of General Legal Administration, Ministry of Justice and Human Rights in order to learn the legal owner and ultimate beneficial owner of mining business entities.

“In the oil and gas sector, Special Task Force for Upstream Oil and Gas Management (SKK Migas) has initiated exchange of information with DG General Legal and Administration. This shall be replicated in mineral and coal sector. The blacklisted mining business entities then shall be passed to the law enforcement authorities, financial regulatory institutions and also the banks, in order for them to be executed and noted as special record for the financial institution in providing access to capital.

As delivered by the Director of Mineral and Coal Revenue, MEMR, Jonson Pakpahan on media this week, by February 2017, the total arrears of non-tax revenue reach IDR 5,072 trillion. This is contributed by various permit regimes, including thousand mining permits approximately IDR 3,949 trillion, Coal Contract of Work approximately IDR 1,101 trillion and 920 billion, and Contract of Work approximately IDR 20,636 billion (Investor Daily, 13 March 2017). While the outstanding from the first generation of Coal Contract of Work which reached 21 trillion at the end of last year, has claimed being resolved through set-off mechanism.

Government has set the deadline for non-tax revenue debt settlement on 31st March 2017. DG of Mineral and Coal also has published the notification letter about non-tax revenue arrears to all governors in Indonesia. Consequently, if the business entities did not pay their financial obligation before 31st March 2017, DG of Mineral and Coal will not issue Clean and Clear certification, Listed Exporter Permit, and Agreement Letter of Export, and harbormaster permit.

On the other hand, PWYP Indonesia appreciated the ongoing process of debt settlement which has resulted the decrease of arrears from the initial number in IDR 26 trillion. “Korsup Minerba initiated by KPK and MEMR has been running for more than three years and has revealed weak mining governance. For instance, lack of compliance to fulfill financial obligation, including non-tax revenue. It’s time for the government, particularly under current leadership of Minister of Energy and Mineral Resurces, to take bold action toward the business entities whose activity has impacted the environment. which give a significant impact to the environment,” said Maryati.

Agung Budiono, Researcher for Mineral and Coal Governance, PWYP Indonesia, revealed that the biggest unpaid arrears, amounted IDR 3.9 trillion, is contributed by 3000s IUP holders, especially those who don’t possess certificate of CnC. The appointed deadline possibly doesn’t guarantee the delinquent companies will meet the obligation. Therefore, law enforcement, in accordance with the Non-Tax Revenue Law Number 20/1997, shall be implemented to give deterrent effect for the companies. “Without bold action from government, these problems will recur and local government, as the beneficiary of non-tax revenue, will always be disadvantaged,” said Agung.

Non-Tax Revenue Law Number 20/1997, particularly in Article 20, stipulated that the required payer of non-tax revenue who due to negligence did not report the Non-Tax Revenue arrears or report the wrong information of Non-Tax Revenue arrears and caused potential loss of state revenue shall be punished by a maximum confinement of one year and a maximum fine amounted twice of total non-tax revenue arrears.

Rizky Ananda Wulan, Researcher of PWYP Indonesia reminded that the set-off mechanism implemented to resolve the outstanding of first generation of Coal Contract of Work shall be opened to public, especially regarding data transparency. Need to be underlined here, the debt settlement amounted 21 trillion is conducted through restitution of PPN (Added-Value Tax) with royalty. Royalty itself is one of the component of Non-Tax Revenue that will be distributed to local government through Revenue Sharing Fund scheme. If this issue is claimed as resolved, then will trillions of rupiah be distributed to local government through Revenue Sharing Fund scheme this year? Or other mechanism applied here? Therefore, the disaggregated data of Coal Contract of Work companies and the operation area should be opened to public to ensure the fulfillment of local government right toward revenue sharing fund,” said Rizky.

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