Wednesday 19 October 2011

HOUSE URGED GOVERNMENT TO REVIEW OIL GAS COLLABORATION CONTRACTS

The Board of State’s Financial Accountability (BAKN) of House urged the Government, in this case the Directorate General of Oil-Gas and BP Migas to  make evaluations of oil gas collaboration contracts underway especially over cases of dispute or other unsettled cases. This was among the conclusions read by Chairman of BAKN Ahmad Marzuksi during hearing session with the Director General of Oil gas and BP Migas at the House of Representatives.

Other conclusion was that House proposed that to solve this problem coordination be made between BP Migas, BPKP and the Directorate General of Tax so the hindrances should not drag on, while BP Migas was asked to make approaches to contractors (at the head quarters) to urge them to solve oil-gas taxation problem.

Vice Chairman of BAKN of House, Yahya Sacawriria stated that the Government, c.q. Directorate General of Oil Gas, the Ministry of Energy and Mineral Resources had made approaches to foreign contractors whose tax obligations were still due. According to the Board of Financial Control and Development to the Board of Financial Control and Development (BPKB), there was still remaining tax due by foreign contractors including those of England who had been operating including those of England who had been operating since 1990’s the total amount of which came to Rp 4 trillion.

This occurred because of different interpretation of tax treaty. According to the foreign contractors the range of tax treaty was 10 percent whilst BPKB claimed 20%. Such thing was not applicable to American contractors who only started operations in year 2000 when the Law of Oil Gas was put in effect.

Different perception needed not be synchronized so the Government needed not to bear loss. However proper approach was necessary so operators would not walk out of the country.

The Directorate General of Tax was expected to promptly issue a tax decree to prevent the fund from escaping. Very probably the case would be brought into the realm of Law. Indonesia had souvereignity over mineral riches in its earth. If this case were let to drag on, it was the Government who would be disadvantaged. Beside losing money, the Government would be charged as unable to manage energy. The public might even suspect there had been some sort of leaking or manipulation.

BAKN of House as instrument of Parliament to control state’s finance, would try to help to find solution for Indonesia in trying to fight for their right.

BAKN of House has invited BPO Migas to explain this case of tax overdue from KKKS Migas. This was one of the conclusions of the hearing session with the Director General of Tax Fu ad Rahmani and Head of BPKP Mardiasmo at the House of Representatives.

It was disclosed that BAKN of House would follow up outcome of meeting with the Director General of Tax to Commission VII of House to finalize the process of BPK or BPKP examination in regard to the case of overdue tax of KKKS Migas. Member of BAKN of House Edwin Kawilarang said that things like tax treaty was unknown. He said that the law was stronger that tax treaty unless there were other law which amended it. Today there was no law related to tax treaty and there had never been any clarification that tax treaty was lex specialis.

According to the Director General of Tax, the under payment of tax was due to several reasons, among other tax subject KKKS Migas did not pay Migas Income Tax and KKKS Migas applied tax treaty lower that the obligation of income tax )Article 26 point 4).

Audit income of BPKB and BPKB of payment of oil gas tax disclosed that the portion for state in-come which was supposedly 85% became 73.15% The difference was because the company demanded 15% of payment to be received net without tax.

The result was that interest tax, and royalty amounting to 13.5% was included in state income. So 85% of Government portion consisted of 71.15% gross income and 13.85% royalty interest tax and dividend. Therefore the Board of Financial Examination (BPKP) persisted to ask to loss of state income amounting to USD 159.3 million due to out standing tax of some oil gas companies.
    

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