Indonesia eyes hefty tax to curb mine export rush

JAKARTA/ PERTH – Indonesia is considering a hefty tax on mining exports to stop miners from over-exploiting resources to beat a 2014 ban on shipments of some unprocessed metals and lower grade coal, an official said on Wednesday, but the plan may backfire if foreign buyers turn elsewhere.

The proposal to impose a 25-percent export tax on coal and base metals — rising to 50 per cent in 2013 — was greeted with a mix of confusion and skepticism as both producers and importers across Asia tried to assess its impact.

“Ever since we issued a mining law in 2009, miners have reacted by increasing their production multiple times, exploiting and exporting everything they’ve got,” Thamrin Sihite, director general for coal and minerals at Indonesia’s ministry of energy and minerals, told Reuters.

“This is dangerous and we need to curb that. We issued a ministerial regulation in February to ban unprocessed mineral ores and this new export tax regulation. … We hope the tax will reduce the export rush further. But I can’t tell you when it will be issued.”

The latest tax proposal could join a raft of regulations aimed at increasing government revenues that have worried global mining companies operating in Indonesia, where the fast-growing mining sector makes up about 11 per cent of GDP.

Indonesia exported $3.8 billion worth of copper in 2011 and $7.3 billion worth of metal ore. Mineral fuels exports, including coal, were valued at $27.4 billion.

The government says the new rules also aim at spurring downstream investment. Indonesia has the world’s second-largest copper mine but only one copper smelter, and this smelting capacity shortage is mirrored for other metals.

The archipelago is the world’s largest exporter of thermal coal and is expected to ship out about 300 million tonnes this year to customers across the region.