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Indonesia: Selected Issues

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International Monetary Fund
Published Date:
September 2012
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IV. Mineral Taxation in Indonesia1

Indonesia has substantial mineral wealth, contributing significantly to GDP and government revenues. The mix of natural resource tax instruments is in line with international practice and the tax rates, as set out in the new 2009 Minerals Law, comparable to other countries (but higher for older Contracts of Work.)2 The 2009 Mining Law increased the transparency and stability of the mining regime, but uncertainties remain around details due to delays in the issuance of some of the implementing regulations. This is reflected in the generally lower ratings given by investors to Indonesia’s mineral policy regime. Further progress in improving the overall business environment and in ensuring transparency and stability of tax and divestment requirements for mineral extraction would help assure that future investment remains strong.

A. General Principles of Natural Resource Taxation

1. Natural resource extraction has four generic features that make it distinctive from other productive economic industries (Collier, 2009). The ultimate owners of natural resources are the citizens; the extraction is a process of asset depletion rather than production using renewable inputs; investment in extraction has high sunk costs and long payback periods; and minerals have high price volatility. A distinguishing characteristic of the mining industry is that the amount of economic rents (defined as the excess profit above the “normal” rate of return to capital) generated vary from mine to mine. Those with low exploration costs and rich endowments generate high rents, while others far from developed infrastructure or operating with high costs might be at the margin.

2. A key issue for many countries, including Indonesia, is how mineral wealth can best be translated into socio-economic development. The rationale for putting in place a special natural resource taxation regime is the existence of large potential economic rents in the industry. In principle, governments want to tax away these economic rents, to be used for development purposes, and leave the appropriate after-tax return required by investors.

3. However, several trade-offs characterize the design of mineral fiscal regimes. These include the costs and benefits of different types of regimes, definition and measurement of “normal” profits, the pros and cons of different specific tax instruments, and the timing of revenue receipts. These issues are taken up in the following nine paragraphs.

4. There are broadly two types of fiscal regimes to tax mineral resources: contractual-based system and concessionary regimes. While concessionary regimes provide companies full control of the production process, contractual-based regimes usually leave control over at least a share of output to governments. While developed countries usually regulate fiscal terms in legal codes, many developing countries regulate details in individual agreements. The accepted best practice is to establish generally applicable fiscal terms in the law and avoid case-by-case negotiation of terms.

5. In theory, the perfect tax system from the government’s viewpoint would tax away all economic rents above the “normal” profit.3 Although economic rent is a clear theoretical concept, it is difficult to define in practice. It is impossible to know how much rent exists in advance, and even ex post there are difficulties in measuring it. The key issues with measuring rents are that: (i) the extent and profitability of a particular mine cannot be known with certainty; (ii) rent should be measured over the entire project lifecycle, including by taking into account the costs of failed explorations; and, (iii) economic rent may be difficult to differentiate from managerial rents for special expertise, technology, etc.

6. The taxation instruments for mining projects can be classified as profit-, production-, or input-based (ICMM, 2009). Profit-based taxes include income tax, profit tax, royalty based on profit or income measures, resource rent tax, and withholding taxes on dividends. Production-based taxes include unit-based or ad valorem royalties, import and export duties, VAT, etc. Input-based taxes are duties (for a detailed discussion of taxes and tax incentives (see Otto, 2000 and ICMM, 2009). Besides taxes imposed by the central government, local authorities may also collect other taxes and charges, most commonly property tax.

7. Theory suggests that taxation should be neutral with respect to investment and production decisions in order to maximize economic efficiency. This means that the regime should be such that producers do not have incentives to shift their investment or production as a result of the tax. That purpose is served by profit-based taxes, but not by production based royalties. The latter increases per unit cost of production, therefore investors will have an incentive not to explore investments with high production cost (closer to the margin) that would otherwise be commercially viable. Unit-based taxes have a distorting effect on investment decisions and are therefore not efficient (see following figures).4

Effect of Profit-Based Taxes on Investment Decision

Effect of Production-Based Taxes on Investment Decision

8. Taxing based on profitability versus production also has implications for the timing of revenue receipts. Natural resource investments generate positive profits only with a great time lag because of the substantial investments required before production can begin. However, in many countries these revenues constitute a large share of government income and, therefore, there are significant incentives for governments to seek to realize these sooner rather than later. Thus while profit-based taxes are more investment neutral and economically efficient, and hence usually preferred by investors, production-based taxes are preferred by governments. The latter are more attractive to governments because they do not tie budget revenues to profits and instead ensure revenues in all production periods, even in the absence of profits.

9. In the case of profit-based taxes, the two key elements are the tax rate and the tax base. Tax rates are usually flat or slightly increasing with profit, but the tax base is often influenced by governments through the provision of tax incentives. Although the types of tax incentives provided to the mining sector are similar to those provided to other sectors, their rules can be specific. For the most common types of tax incentives, see table below.

Tax Incentives in the Mining Sector
Tax IncentiveDescription
Accelerated capital cost allowancesAllows accelerated payback; allows firms a higher level of real discounted profits after tax; shifts risks to governments by delaying income tax; could be trade off with higher tax rate.
General and reinvestment tax creditsBased on annual extraction rates, tax payments are decreased; may be based on cost or volume.
Tax holidaysMoratorium on income tax and other payments for a set number of years.
Source: ICMM, 2009.
Source: ICMM, 2009.

10. Another key feature affecting the tax base is the approach to ring-fencing. This relates to the question of whether there is separate treatment of different investment projects with regard to tax calculation purposes or a consolidated treatment. With ring-fencing, project revenues of a profitable project cannot be offset by losses suffered on other investments. Project ring-fencing is more common in countries where tax regimes are negotiated for individual projects (contract-base regimes), for example in Indonesia where several generation of Contracts of Work (CoW) exist for mining companies.

11. To summarize, there are several contradictory objectives in designing a tax regime. It should provide a revenue stream for governments in all production periods, and with an increasing share of revenues as profitability increases (progressivity); provide minimal disincentives for production and investment; and remain robust amid changing circumstances (stability). The optimal tax regime in practice is a mix of several elements, a combination of royalty, some rent capture mechanism and the corporate income tax (CIT).

12. Each of these instruments has benefits and costs and their choice is best determined by broad principles. Rent taxation is most efficient in principle, but hard to calculate and administer. Royalties distort extraction and exploration, but assure some revenues from the start of production. The regular corporate income tax provides consistent treatment with other sectors. Overall, discretionary elements should be minimized and special treatment and incentives avoided as they create incentives for aggressive tax planning and rent-seeking.5 The appropriate tax regime should be also designed with attention to other considerations besides potential tax revenues, such as investment and production incentives, cost of collecting revenues, and cost of compliance. In the case of a complex tax system, multiple elements are in interaction, therefore detailed modeling using project-level data is critical in understanding the overall impact of the system on both the producers and the budget.

B. Nontax Factors, Company Perspective

13. Turning from the government to mining companies, it is important to note that factors apart from the tax regime are important determinants of their behavior. Companies have limited resources and usually multiple alternative projects in which to invest, and they consider a range of factors in arriving at their decisions. Based on interviews conducted with mineral companies, the elements identified in the following table play decisive roles in companies’ investment decisions (Otto et al, 2006). In the table below, the factors that are tax related are in bold, with the other important determinants related to the general investment climate. This broad pattern reflecting the importance of non-tax factors is confirmed by other interviews with mining companies (see for example ICMM, 2009).

Mining Company Ranking of Investment Decision Criteria

(Out of 60 possible predetermined criteria)
Exploration Stage 1/Mining Stage 1/Investment Decision Criteria
1n.a.Geological potential for target mineral
n.a.3Measure of profitability
21Security of tenure
32Ability to repatriate profits
49Consistency and constancy of mineral policies
57Company has management control
611Mineral ownership
76Realistic foreign exchange regulations
84Stability of exploration and mining terms
95Ability to predetermine tax liability
108Ability to predetermine environmental obligations
1110Stability of fiscal regime
1212Ability to raise external financing
1316Long-term national stability
1417Established mineral titles system
15n.a.Ability to apply geologic assessment techniques
Source: Otto and others, 2006.

n.a. = not applicable.

Source: Otto and others, 2006.

n.a. = not applicable.

14. Companies emphasize stability and predictability as the most important aspect of fiscal regimes. Tax incentives and low tax rates are only attractive if there is a credible commitment to maintain them in the longer term. Companies perceive a greater uncertainty if fiscal terms are negotiated bilaterally and not set in a statute. Companies value the stability of the tax system more than low levels of taxes, particularly because very low tax levels can often meet with high political pressure to change them, undermining predictability. Contracts of works are designed to provide stability for the individual companies, but in general they create instability in the sense that the individual terms are exposed to the discretion of the government. Any contract can be varied at any time by mutual agreement, while changing a law requires parliamentary approval.

15. Companies value simplicity and consistency of the tax system. When making an investment decision, future tax obligations have to be taken into account and the complexity of the tax system makes the comparison of investment projects difficult for companies. Tax administration is also a very important factor for mining companies. Good tax administration means effective application of laws and regulations, the existence of a fair and efficient legal system for dispute resolution, well-working tax refund mechanisms, and low compliance costs. Delayed tax refunds usually have substantial financial costs for companies. Other important factors mentioned by companies were transparency by governments of the use of extractive revenues. They also value the capacity of governments to spend mineral tax revenues effectively.

C. Mining Fiscal Regime in Indonesia

Tax system

16. The oil and mining sector is large in Indonesia. Over the last decade, the sector has accounted for about 8–10 percent to GDP, of which minerals account for 2–4 percentage points. The most important mineral commodities are coal, copper, gold, tin, nickel, and silver, with Indonesia having non-negligible shares in world production of these minerals. For most commodities, production has been very stable in the last decade with coal being the only exception. Coal production has been steadily increasing; in 2010 it was about 3.5 times the 2000 level. In line with increasing production, the revenue take of government has also been steadily increasing.

Indonesia: Share of World Production in Some Minerals, 2009
CopperGoldNickelTinCoal 1/
Cu kTkOzKTTinMT
Indonesia6106520355190
Total Asia and Pacific2,8704396791923,320
World15,3002,0101,5802755,140
Indonesia
Share of Asia and Pacific (in percent)211530296
Share of world production (in percent)4313204
Source: U.S. Geological Survey, 2009.

Bituminous: 95 percent of world anthracite production from China.

Source: U.S. Geological Survey, 2009.

Bituminous: 95 percent of world anthracite production from China.

Mineral Mining Production, 2000−10, Relative to 2000 Production Level

(In percent)

Sources: Indonesia, Statistics of Direktorat Pembinaan Pengusahaan Mineral dan Batubara; and British Petroleum Energy Statistics. 0.00

Government Revenue from Minerals 1/

(In percent of GDP)

Sources: Indonesian authorities; and IMF staff calculations.

1/ Revenue does not include CIT and VAT, only royalties, fees, and revenues from selling.

17. Investment projects before 2009 were regulated in bilateral Contracts of Work. There are seven generations of CoWs, all with somewhat different terms. In 2009, a new mining law was enacted to bring a fundamental reform to the system, moving away from the case-by-case basis. Subsequently some implementing regulations have been issued, but the reform process is still ongoing, with finalization of other implementing regulation still pending.

18. The mining tax regime in Indonesia contains multiple elements.6 Companies pay royalty, CIT, VAT, and withholding tax on dividends and interest. Under the new mining law, royalty rates on production vary between 2–7 percent of sales proceeds depending on the mining scale, production level, and commodity price. The royalty base is not always clearly defined and differs by type of mineral. Companies with a Special Mining Business License under the new law (IUPK) pay an additional royalty of 10 percent of their net profit (thus it is similar in effect to an additional income tax). Royalty rates under CoWs are usually higher than under the mining law, in many cases 13.5 percent. Nevertheless, IUP holders can be subject to the new 20 percent export tax, which essentially acts as an additional royalty (see later section on trade barriers). Overall, the base royalty applied by Indonesia in the Mining Law is in line with international practice, but the 10 percent additional tax is not. Royalty rates of 2–7 percent are in the typical range of comparable countries (see table), in case of some minerals (e.g., coal) toward the lower end. However, the rate of 13.5 percent for some CoWs is very high in international comparison. Furthermore, without sufficient detail about individual mining operations, however, it is difficult to form any judgment about whether they are excessive, low, or the right level.

19. The corporate income tax rate differs between companies with CoWs and those falling under the new mining law. The latter pay the CIT according to the standardized tax regime, where the tax rate is set at 25 percent (20 percent for publicly listed companies) of net taxable profits. The allowable depreciation rate depends on the nature of the capital asset and can be amortized over 4–20 years. Exploration and mine development expenses are generally capitalized and amortized upon spending. The loss carry forward period is five years; there is no loss carry-back possibility. Reclamation reserves are deductible. Provisions on mine closure costs are unclear.7 No thin capitalization rules are in place, but there is increasing audit of related party transactions. Investment projects are ring-fenced, thus every company can only apply for one license. The CIT rules and most deductions are in line with common international practice. The standard CIT rate of 25 percent is in the range of comparable countries (see following table).

Royalty Rates by Commodities in Indonesia, Set Out in the 2009 Mining Law
Coal
Open pit3–7 percent
Underground2–6 percent
Nickel4−5 percent
Zinc3 percent
Tin3 percent
Copper4 percent
Iron3 percent
Gold3.75 percent
Silver3.25 percent
Iron sand3.75 percent
Bauxite3.75 percent
Source: PWC, 2011.
Source: PWC, 2011.
Mineral Taxation Regime: Selected Countries
Additional MineralsExport Tax on
Royalty 1/CITTaxMinerals
AustraliaState royalties apply in the range of 1.25−7.5 percent. New resource rent tax credits state-level royaltiesFederal tax: 30 percentMineral resource rent taxNo 2/
ChinaAd valorem and per unit resource taxes varying by types of minerals25 percentYes
IndiaAd valorem or unit based royalties, varying by types of minerals, between 0.2 and 20 percent30 percent for residents, 40 percent for foreignNoYes
IndonesiaRoyalties of 2−7 percent depending on type of mineral, or as regulated by contract. Under CoWs royalties are usually higher.25% (20% for listed companies) or depending on CoW.NoYes
KazakhstanRoyalty was replaced with mineral extraction tax levied upon the cost of produced volumes of minerals, fixed rates depending on mineral.20 percentProgressive excess profit tax with rates 0−60 percentYes
PhilippinesRoyalties of 2−5 percent30 percentRoyalty to indigenous people and local business on extraction of mineralsNo, but excise tax on minerals equivalent to export tax for exporters
RussiaMineral resources extraction tax at the rate of 3.8−8 percent (rates depend on the type of mineral) based on the value of extracted mineral20 percentNoYes
South AfricaVariable rate depending on EBIT; max rate for refined minerals: 5 percent, for unrefined minerals: 7 percentStandard CIT of 28 percent and STC of 10 percentNoOn diamonds, but not yet applied
United StatesState specific35 percent plus state income taxNoNo
Sources: Hogan and Goldsworthy, 2010; PWC, 2010; national regulations; and IMF resources.

Royalty rates are not directly comparable as rules regarding the tax base may be different.

In 2011.

Sources: Hogan and Goldsworthy, 2010; PWC, 2010; national regulations; and IMF resources.

Royalty rates are not directly comparable as rules regarding the tax base may be different.

In 2011.

20. The standard VAT rate is 10 percent. Supplies of gold bars, coal and natural resources taken directly from source are exempt from VAT. For mining projects, pre-production purchases are substantial; therefore VAT overpayment in the early periods is a general problem. VAT refunds are somewhat problematic, especially for long-term mining projects with several years of pre-production period. Withholding taxes are applied on dividend, interest (at a rate of 15 percent) and services (at a rate of 2 percent).

21. The new mining law also has several other provisions with fiscal consequences. Companies are obliged to meet domestic market obligations (DMO), providing authority to the central government to control production and export. The purpose of DMO is to guarantee the supply for domestic demand. It creates perceived risk of government interference; therefore the assurance of market price would be critical. There is a price benchmarking system in place for coal producers that serves as a basis for royalty calculations if the actual price is below the benchmark. Foreign capital owners have a divestment obligation; Indonesian nationals must own at least 20 percent of shares by the fifth year of production (this has recently been augmented with an additional divestment requirement—see below—and under the changes announced in early 2012, companies are also required to carry out in-country processing and refining by 2015). Production limits can also be set up if regarded necessary by the central government.

22. The new mining tax system is similar to those of other natural resource rich countries, both regarding the tax mix and tax rates. While the CIT rate is toward the lower end of the scale, royalty rates set by the Mining Law are in the range of other countries, except the additional 10 percent royalty of Companies with a Special Mining Business License under the new law (IUPKs). Royalties set by CoWs, on the other hand, are more toward the higher end but again, in the absence of data on individual mining operations, it is difficult to form a view about whether they are excessive or still too low. The 2 percent withholding tax rate of services is low in international comparison. Table 5 shows that some countries still apply export taxes on minerals, but the international trend is to move away from such taxes.

23. In summary, the mineral tax regime in Indonesia as set out in the new 2009 Mineral Law is in line both with theoretical recommendations and international practice. Mineral revenues are taxed with royalties and CIT. Considering both royalties and CIT, the overall system is regressive. The basis for royalties differs by minerals and are also different for CoW and IUP holders. Specific royalties should be replaced with ad valorem royalty to increase efficiency and improve transparency. In the medium term, moving toward a resource rent tax would enhance economic efficiency. Distortions introduced by the newly enacted export tax on minerals will be discussed in a later section.

Non-tax factors

24. Indonesia does not score very well in non-tax factors affecting investment.8 Based on a survey conducted by the Fraser Institute in 2011/12, Indonesia came out in the bottom 10 of 93 jurisdictions, among Honduras, Guatemala, Bolivia, Venezuela, India, the Philippines, Kyrgyzstan, Ecuador, and Vietnam. Indonesia’s relative perception has been deteriorating in recent years. Indonesia scores second highest when considering room for improvement, suggesting that the current policy framework is perceived as an obstacle for investors. Investors note that they experience high uncertainty concerning the stability of the tax regime, administration and enforcement of existing regulations, and lack of fair legal processes. They consider regulatory duplications and inconsistencies as a strong deterrent to investment. Lack of infrastructure and community development is viewed as a negative factor. Indonesia is further viewed as a highly corrupt jurisdiction. Security issues are also cited as important concerns. Taxation regime, trade barriers,9 and political stability received somewhat better scores with many investors only seeing these as mild deterrents to investment in Indonesia.

25. Indonesia, however, scores in the middle range when considering policy and mineral potential together. This is due to the fact that most investors consider its geology very favorably and policy factors as deterrents, but not to the extent to prevent them from investing. Therefore, by improving the policy framework, most importantly non-tax factors, Indonesia could become a lot more attractive as an investment target.

26. In summary, investors see non-tax factors as the obstacles to investment. This is especially the case for administration, simplicity, and predictability of the fiscal regime, providing significant room for improvement. The negative perceptions are currently counterbalanced by the great geological opportunities of the country, but frequent changes and uncertainty about the tax system might have a negative impact on future investments.

D. Trade Barriers

27. In the spring of 2012, Indonesia announced several measures to control mineral ore exports. Most importantly, the government announced that it would impose a 20 percent export tax on the total value of raw mineral exports from May 2012. It also requires foreign shareholders of Indonesian mining companies to divest 51 percent of their shares (as opposed to the earlier 20 percent) after the fifth, but before the tenth year of production, and to carry out in-country processing and refining by 2015. These only apply to companies under the new mining law, not to CoW holders.10 Although some countries apply similar tax policy instruments, theory suggests that the effects of these measures might be adverse to the whole economy.

28. The impact of export taxes varies depending on whether or not they affect world prices. A WTO study (Piermartini, 2004) argues that if a country is a big producer, then export volume changes will affect world prices.11 For a major producer, the export tax decreases exports and in turn supply will fall, causing an increase in the world price and thus reduction in aggregate demand. The price difference between domestic price and world price increases domestic demand and causes a positive terms-of-trade effect. However, in case of a country with a small share in world production, such as the case with Indonesia, changes in export volume will not meaningfully affect the world price; therefore, only efficiency losses remain, making the effect of an export tax unambiguously negative. The export tax is absorbed entirely by domestic producers.

29. The efficiency losses arise by reallocating resources toward areas where comparative advantage does not exist. In effect, an export tax on raw commodities subsidizes inefficient domestic processing through the depressed domestic commodity price. This transfers welfare from the sector producing raw material to the sector processing it, but there is a net loss for the country. Raw commodity production might decrease causing employment and wages to fall in that sector, while the opposite would happen in the processing sector. In the long run, the cost of the export tax will be borne by those factors of production specific to the production of the taxed good that cannot move to another sector. An export tax may also lead to domestic inefficiency in downstream industries as the domestic prices remain unduly depressed. Foreign producers and consumers—facing higher costs—have an incentive to develop the technology or substitutes for the product in order to remain competitive (Bonarriva, Koscielski, and Wilson, 2009).

30. Export taxes may also have negative environmental consequences. They may encourage wasting by creating lower-than-equilibrium domestic prices. For example, in the case of Indonesia, imposing export taxes on lumber is estimated to have caused a wastage ratio of up to 50 percent (Piermartini, 2004).

31. The immediate economic impact of the recently adopted measures are minimal, but could have indirect costs. They are not expected to have a significant real impact on near-term exports, since larger producers are not affected as those are CoW holders. Smaller producers that will likely have to pay taxes will be negatively affected by the export taxes. However, these measures could send a negative signal to potential investors of potentially reduced profits and risk of further changes. Over the longer term, the proposed export ban as well as regulation for foreign investors to divest could adversely impact on investors’ confidence and hence prospects for FDI inflows. As surveys of mining companies indicate, the predictability of the tax regime is a key issue for capital intensive resource projects and ad hoc policy measures can undermine that.

References

    BahlR. andB. Tumennasan2002How Should Revenues from Natural Resources be Shared in Indonesia?International Studies Program Working Paper 02−24 (Atlanta, Georgia: Andrew Young School of Policy Studies, Georgia State University).

    BonarrivaJ. M. Koscielski andE. Wilson2009Exports Controls: An overview of Their Use, Economic Effects, and Treatment in the Global Trading SystemOffice of Industries Working Paper No. ID-23 (Washington: Office of Industries, U.S. International Trade Commission).

    CollierP. 2009Principles of Resource Taxation for Low-Income Countriesin The Taxation of Petroleum and Minerals: Principles Problems and Practiceeds. by P. DanielM. Keen andC. McPherson (London and New York: Routledge).

    HoganL. andB. Goldsworthy2009International Mineral Taxation, Experience and Issuesin The Taxation of Petroleum and Minerals: Principles Problems and Practiceeds. by P. DanielM. Keen andC. McPherson (London and New York: Routledge).

    International Council on Mining & Metals (ICMM) and Commonwealth Secretariat 2009 “Minerals Taxation Regimes: A Review of Issues and Challenges in Their Design and ApplicationFebruary (London: ICMM and Commonwealth Secretariat).

    McMahonF. andM. Cervantes2012Fraser Institute Annual Survey of Mining Companies 2011/2012 (Vancouver: The Fraser Institute).

    OttoJ. 2000Mining Taxation in Developing Countriesa study prepared for UNCTAD. Available via the Internet: http://r0.unctad.org/infocomm/diversification/cape/pdf/otto.pdf.

    OttoJ. C.AndrewsF.CawoodM.DoggettP.GujF.StermoleJ.Stermole andJ. Tilton2006Mining Royalties A Global Study of Their Impact on Investors Government and Civil Society (Washington: The World Bank).

    PiermartiniR. 2004The Role of Export Taxes in the Field of Primary CommoditiesWTO Discussion Papers No. 4 (Geneva: World Trade Organization).

    PwC2010Income Taxes Mining Taxes and Mining Royalties A Summary of Selected Countries (Available via the Internet: www.pwc.com.

    PwC Indonesia2011Mining in Indonesia Investment and Taxation Guide. Available via the Internet: www.pwc.com/id/en/index.jhtml.

Prepared by Dora Benedek. Indonesia has substantial natural resource wealth of oil and gas, forestry, and fisheries as well. This chapter discusses mineral taxation of Indonesia in the context of broad principles. A more comprehensive and detailed set of recommendations would require very specifics of individual mining operations to be taken into account that are beyond the scope of this chapter.

This reflects a simple comparison of rates across countries and is not an assessment of the tax burdens (in either absolute or relative terms) as the latter reflect various country-specific and individual mining operation specific factors.

There are also arguments that in order to maintain incentives for investment and economic efficiency some share of the economic rent might be left with the producers.

For a more detailed assessment of mineral taxation options see Hogan and Goldsworthy, 2009.

Another important aspect (not discussed in this chapter) is that the tax administration should have the capacity to administer the fiscal regime and profit-based taxes generally have higher administrative costs.

For a detailed description of the mining tax regime see PWC, 2011.

Reclamation costs are incurred through project life while closure costs are incurred after production stops.

The Fraser Institute conducts a survey of about 5,000 mining companies to assess the public policy framework for investment of 93 jurisdictions. Based on the survey answers a Policy Potential Index (PPI) is composed to measure overall policy attractiveness (McMahon and Cervantes, 2012).

The survey was taken before the introduction of recent trade and investment related measures were announced.

For CoW holders all taxes are regulated in the contract and export taxes are not included. Nevertheless the government has announced that it will initiate the renegotiation of some CoWs.

It is difficult to define the size of production which allows a country to influence world price, however based on the table in para. 16, Indonesia has a rather minor share of the world trade in case of most commodities, with tin being the only exception.

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