JAKARTA: Indonesian tax authorities has decided to end land tax on companies exploring oil and gas in the country, which might encourage exploration at a time when oil prices were tumbling sharply on global front.
As per the information available at Finance Ministry’s website, the tax office is no longer assessing a 0.5 percent “land and building tax” on the area in which companies are carrying out exploration activities, effective from Jan. 1.
The ministry’s tax office spokesman Wahju Tumakaka said the interpretation used for taxing exploration areas was wrong, thus the ministry amended the regulation. The tax “is supposed to be applied for those using Indonesian land. In terms of the oil and gas sector, it should only be applied during production stage,” Tumakaka told Reuters. He said that in 2014, the land and building tax from oil and gas exploration and production work brought in about 18 trillion rupiah ($1.43 billion), or 1.2 percent of total government revenue.
No breakdown of what percentage came from just oil exploration was available. In December, the Indonesian Petroleum Association said that spending on oil and gas exploration and production in the country could fall by up to 20 percent this year. Indonesia, a former OPEC member, was self-sufficient in oil for decades, but is now a net importer. Output in the Southeast Asian nation has declined since a 1995 peak, and is projected to fall to 700,000 barrels a day (bpd) in 2019 from an estimated 849,000 bpd this year.
