A dispute between the Papua provincial administration and PT Freeport Indonesia over a surface water tax has been resolved after Papua Governor Lukas Enembe met with Freeport Indonesia president commissioner Richard Adkerson at the Freeport McMoran headquarters in Phoenix, Arizona, United States.
The two parties agreed to a Rp 1.39 trillion (US$96.4 million) surface water tax, which was smaller than the amount the Papua administration wanted but bigger than what Freeport was initially willing to pay.
Adkerson, who was accompanied by Freeport Indonesia CEO Tonny Wenas, said that Freeport was not obliged to pay the tax the Papua administration had requested since 2011, as the Supreme Court had ruled in favor of Freeport in April last year. The Supreme Court freed Freeport from an obligation to pay roughly Rp 3.9 trillion in tax.
Previously, the tax court, which is a lower court than the Supreme Court, ruled in favor of the Papua administration concerning unpaid taxes of almost Rp 6 trillion.
“Based on the decision by Indonesia’s highest court, we are not obliged to pay the tax. However, Freeport and the Papua administration have good intentions for long term cooperation to support Freeport Indonesia’s operations for the sake of Papuans’ prosperity,” Adkerson said on Wednesday after meeting with Lukas.
Adkerson said Freeport would pay part of the disputed surface water tax from 2011 to 2018, which was Rp 1.39 trillion.
“[The tax] will be paid over three years, starting from 2019 to 2021,” Adkerson said last week.
In addition, starting from 2019, Freeport will pay an annual surface water tax of US$15 million per year, as regulated by its special mining business permit.
The tax dispute between the Papua administration and Freeport began in 2011. Freeport believed it only owed the tax stipulated in Bylaw No. 5/1990, which had a tax rate of Rp 10/m3, when the working contract was signed. Meanwhile, the Papua administration wanted Freeport to pay the tax stipulated in Bylaw No. 4/2011 on regional tax, which had a tax rate of Rp 120/m3.
Governor Lukas said the Supreme Court’s ruling that Freeport Indonesia did not need to pay any surface water tax should not be used an excuse by the company to not pay any taxes.
He said Freeport and Papua would issue a memorandum of understanding (MoU) in the near future that would detail the amount to be paid and the schedule of payment.