The potential for tax revenue from the coal sector in East Kalimantan is still wide open. However, there are a number of gray areas that are difficult to penetrate.
A 15 meter high pile of coal is clearly visible from Loa Janan Pier, Baungan Village, Kutai Kertanegara, East Kalimantan. A conveyor connects the black gold mountain area to the pontoon or transport ship at the pier on the banks of the Mahakam River.
When Katadata.co.id visited it last November, the conveyor was continuously flowing coal to the pontoon. It took 7-8 hours to fully fill the ship with a capacity of 8.000 tons. “The conveyor works 24 hours. It's always noisy, never stops,” said Sariman, a villager whose house is about 50 meters from the pier.
PT Anuegerah Bara Kaltim (ABK) is the company that owns the conveyor and pontoon. ABK is the owner of a Special Mining Operation Mining Permit (OPK). With this permit, its activities are specifically for processing, transporting, and selling coal.
Even though it plays a role trader, ABK is known to local residents as the owner of the mine. Imam, Head of RT 15 Bakung Village, said crew members often have contact with the community. Company officials provide dust and noise compensation fees to residents there. "The compensation agreement was also signed on behalf of the crew," said Imam while showing the letter of agreement.
In the approval letter shown by Imam, ABK is willing to give two plates of eggs every month to each head of the household in RT 15. In RT 14, ABK allocates 20 cans of milk per month for each head of the household.
Transfer of coal onto a barge in Baungan Village, Kutai Kartanegara Regency, East Kalimantan, (17/1/2019) (Ajeng Dinar Ulfiana | KATADATA)
Compensation for dust and noise funds is a common practice for mining companies. The company that owns the Mining Business License (IUP) which is located in line with the crew, namely PT Indo Perkasa, is the party responsible for the smooth flow of compensation funds. "We know that all the companies own mining permits," said Imam.
The public's ignorance of the status of ABK is because the company has a special agreement with two mining permit holders, namely PT Multisarana Avindo (MSA) and PT Welarco Subur Jaya (WSJ). In the memorandum of understanding, ABK acts as the manager of the mining company, including when dealing with the community.
MSA and WSJ have IUPs covering an area of 4.050 and 1.455 hectares, respectively, in the Baungan Village area, Kutai Kertanegara. ABK shares with the two mining companies to provide funding ranging from exploration to exploitation.
To that end, ABK and MSA have entered into a production sharing agreement since 1997 with an addendum to the agreement on November 8, 2001. In the last agreement, ABK incurred all production costs and as compensation received 88% of coal production. While MSA gets the remaining 12%.
"In the implementation of this collaboration, MSA will authorize crew members to carry out all activities in the field including: exploration, exploitation, marketing, receiving sales proceeds, opening accounts/withdrawing funds from banks, signing documents and so on," reads the article. 11 agreements between ABK and MSA.
The entrance to PT. East Kalimantan Bara Award at Baungan Village, Kutai Kartanegara Regency, East Kalimantan, (17/1). (Ajeng Dinar Ulfiana | KATADATA)
ABK has also made a similar agreement with WSJ since 2012. From this agreement, ABK, which finances all production costs, gets 90% of the coal production and WSJ gets the rest.
The three companies, namely ABK, MSA and WSJ, are mutually affiliated companies. PT Rental Perdana Putratama controls ABK with 92% share ownership. Rental Perdana is also the holding company for MSA (49%) and WSJ (55%). The shareholders of Prime Rental are PT Mitrakarya Selaraskarya, PT Mitrausaha Tuluspratama and an entrepreneur from Batam, Sohat Chairil.
The profit-sharing collaboration between ABK-MSA and ABK-WSJ is explained in the Work Plan and Cost Budget (RKAB). Every year, the issuance of the RKAB requires approval from the local government involving representatives of the Energy and Mineral Resources (ESDM) Office and the local tax office.
From search Katadata.co.idIn the RKAB, MSA and WSJ hand over the executor of mining production activities to a contractor company that has a Mining Services IUP (JP). Contractors appointed by MSA and WSJ include PT Pama Persada Nusantara and PT RPP Contractor Indonesia.
The Balikpapan Tax Office once sued the cooperation in profit sharing transactions between MSA and ABK. The agreement is considered to make ABK control MSA's business so that they suspect that there will be a transfer of Mining Authorization. Based on this argument, the Directorate General of Taxes (Directorate General of Taxes) sued MSA to pay Value Added Tax (VAT).
In the production of raw coal, the government does not collect VAT. However, because it is considered that there is a transfer of Mining Authorization, then there is a delivery of taxable goods or services. In accordance with Law Number 18 of 2000 concerning Value Added Tax on Goods and Services and Sales Tax on Luxury Goods, the delivery of taxable services should be subject to VAT.
The Directorate General of Taxes has sued three times for the tax years of paying VAT 2007, 2009 and 2010. The value of claims for underpayment of VAT in 2007, 2009 and 2010 were Rp. 1,5 billion, respectively; Rp 2,6 billion and Rp 3,6 billion or a total of Rp 7,7 billion.
However, in the three different demands, the judge rejected the Directorate General of Taxes' claim. In one of the decisions at the Supreme Court, the judge stated that there was no transfer of mining authorization from MSA to ABK so that there was no delivery of taxable services. MSA is also VAT-free.
According to ABK Director Johanes Gosal, his company and MSA have consulted with the Kutai Kertanegara Mining and Energy Office regarding the production sharing agreement. This step was taken after the 2009 Minerba Law was enacted.
"We consulted with ESDM Kukar and the center, there have been no licensing problems so far," said Johanes. "Every month also reports to ESDM."
Johanes, who also serves as one of the directors at MSA and WSJ, stated that the companies where he works have reported this transaction every year in the Budget and Cost Work Plan (RKAB). Even so, every year MSA always gets a tax underpayment letter from the local tax office.
This cooperation for coal revenue sharing has also become an endless polemic between the company and the Directorate General of Taxes because there are no detailed regulations governing it. “It is as if it is the right of the IUP holder which is handed over to someone else who manages it. Their term is profit sharing. There is nothing in the law," said the Head of KPP Pratama Tenggarong, East Kalimantan, Widodo.
Meanwhile, the Ministry of Energy and Mineral Resources considers that there is no need to make specific profit-sharing transaction rules. “Share that profit business to business, so it doesn't matter as long as the person carrying out the mining activities is the owner of the IUP OP or orders the Mining Services IUP or the contractor," said the Head of Sub-Directorate for Supervision of Coal Production and Marketing Operations of the Directorate General of Mineral and Coal, Dodik Ariyanto.
The same thing was conveyed by Yustinus Prastowo. This tax observer from the CITA office said the agreement between the coal trader and the mining permit owner was normal. "Because not all IUPs are able to finance the production process, so they usually cooperate with other investors and most of them are trader," said Prastowo.
He said the profit-sharing scheme is a system commonly used in various businesses. "The most important thing is the transparent financial reports of each party," he said.
Adding Prastowo, a tax observer from Taxprime, Suharno said that the ABK and MSA profit sharing agreement is a type of non-administrative Operational Cooperation (KSO). The nature of cooperation is only coordination. In this case, each company carries out its respective obligations.
Prastowo said the government did not regulate the details of the profit-sharing agreement. This makes it a gray area that companies take advantage of. “Every company has a motive to take as much profit as possible, entering the gray area. However, the profit-sharing system cannot be called a violation of the law," said Prastowo.
Coal mining activities in Jahab Village, Tenggarong District, Kutai Kartanegara, East Kalimantan (17/1/2019). Coal Investigation (Ajeng Dinar Ulfiana | KATADATA)
Executive Director PRAKARSA and Coordinator of the Just Tax Forum Ah Maftuchan stated that the non-detailed regulations created loopholes in the law and various interpretations so that industry players could potentially work around them. "It's natural that in some cases the tax authority loses out to industry players. The main problem is the regulation,” said Maftuchan.
Maftuchan assessed that the government should immediately complete the basic regulations of the Minerba Law with technical regulations that are not interpretive. "This is not just a business" business to businessESDM needs to regulate things that are more technically operational," he said.
Since the last few years, the Directorate General of Taxes has indeed tried to optimize state revenues from the coal mining sector. The Provincial Government of East Kalimantan is an area that is encouraged to optimize taxes from coal companies.
In 2017, coal production from East Kalimantan was 82,87 million tons with Kutai Kertanegara Regency as the largest producer with 65,11 million tons. The area of land being mined for coal reaches 5,2 million hectares.
Each year, taxes from coal mining contribute 40% of the total revenue in East Kalimantan. According to the Daily Executor of the Head of the Regional Office of DJP Kaltimra Djumadi, in 2018, East Kalimantan Province targets taxes from coal mining of Rp. 20 trillion. Until the end of November 2018, the target was 79%.
The optimization of the coal sector tax is also encouraged by the Corruption Eradication Commission (KPK). The KPK study concluded that the low tax compliance in the Natural Resources (SDA) sector or extractive industries such as coal mining is still very low.
The low tax compliance can be seen from the income tax (PPh) receipts from coal mining. In 2014, coal mining income tax was IDR 26,40 trillion. This figure is indeed a slight increase from the same period in 2011 amounting to Rp 22,92 trillion. However, when compared with all income tax revenues for that year, it was only around 6,59%.
Director General of Taxes Robert Pakpahan admits that tax compliance in the natural resources sector is still low. Until now, the contribution of coal companies' income tax is still below 7%. "Indeed, from the analysis and including that carried out by the KPK, there is still a gap," said Robert, some time ago.
He said his party would be careful in processing data related to tax optimization. Data must be in accordance with complete evidence so that it has a strong legal basis.