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Report: Indonesia mulls taxing miners' net profits

Indonesia is considering amending tax rules that may require mining companies operating in the country to pay a percentage of their after-tax profits to central and local governments, Reuters reported Oct. 3, citing documents.

Under the proposed changes, special mining permit holders will pay a 4% tariff on after-tax profits to the central government and 6% to regional governments where the companies operate.

The country is revamping its tax regime as part of its transition to a system of special mining permits, replacing the existing mining contracts with the proposed rules to set an income tax rate of 25% on top of the value-added tax on financial transactions and a land tax.

According to the report, most publicly listed mining firms pay a 25% rate or less.

Freeport-McMoRan Inc., however, agreed to a higher 35% income tax rate under its 1991 contract of work in exchange for assurance that the government will not revise the rate until the contract expires in 2021.

Indonesian Finance Minister Sri Mulyani Indrawati declined to confirm the details of the proposal documents but said the government is preparing new rules to regulate companies that need fiscal and nonfiscal certainty.

This comes amid a disagreement between Freeport and the Indonesian government over a proposed divestment of the company's 51% stake in subsidiary PT Freeport Indonesia to local parties.