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The House of Representatives has urged the Attorney General's
Office (AGO) to carry out a transparent investigation into alleged
transfer pricing in coal trade.
The case involves mining firm PT Adaro Indonesia and its
Singapore-based subsidiary Coaltrade Service International Pte Ltd.
The alleged transfer pricing is estimated to have caused trillions of
rupiah in losses to the state in 2005 and 2006.
Chairman of the law commission Trimedya Panjaitan and its deputy
chairman Azis Samsuddin said the AGO was too slow and not transparent
enough with investigative efforts.
They said the case had been widely exposed in the local media during
September last year.
"We are suspicious such a transfer pricing has been a common practice
in Indonesian trade," Trimedya told The Jakarta Post on Saturday.
"And the huge funds corrupted from such a practice have partly flown
political, parties because the mining company's owners are closely
linked to a certain political party."
The Attorney General's Office commenced investigations into the case in
January, 2007.
It received an official report from the Energy and Mineral Resources
Ministry on the alleged transfer pricing which caused a reduced payment
of taxes and royalty to the government.
Adaro is owned by Edwin Soeryadjaya, Benny Subianto, Sandy Uno, Teddy
Rachmat and Garibaldi "Boy" Thohir.
The company was accused of committing transfer pricing when it sold its
coal products to Coaltrade far below international coal prices at the
time.
It sold 26.6 million tons of coal at US$26 per ton in 2005, and 34.2
million tons at $29 per ton in 2006.
The Indonesian Coal-price Index (ICI) and the Energy and Mineral
Resource Ministry said company products with 5,200 kilo-calories were
$48 per ton in 2005 and $40 in 2006.
A reliable source at the Directorate General of Taxes and Customs said
tax officers were still investigating the case.
He said if the company sold its products according to market price, it
should have gained $1.2 billion, instead of $697 million in 2005, and
$1.3 billion instead of 1 billion in 2006.
According to the law, coal mining companies are required to pay 35
percent of their sales in taxes and 13.5 percent of their profit in
royalties to the government.
Soenardi Pardi, a lawyer for Adaro, denied the alleged transfer pricing
but admitted the company, which was set up in 1991 and obtained a
36,000-hectare concession in Kalimantan, was affiliated with Coaltrade.
"The price has been set in the contract between the two companies and
it has been reviewed annually," he said, adding Coaltrade was jointly
owned by Adaro, New Hope Corporation Ltd. in Australia and Vindoor
Investment Ltd. in Mauritius.
An investigation conducted by Gatra weekly last September, revealed
Coaltrade was Adaro's trading company and its operation was fully
controlled by Adaro's personnel.
From the affiliation, Coaltrade booked profits of $3.52 million in
2001, $17.08 million in 2002, $15.22 million in 2003, $28.49 million in
2004 and $42.4 million in 2005.
Thomson Siagian, spokesman for the Attorney General's Office said his
office was still compiling supporting data the government and the two
companies because of technical and administrative difficulties with the
investigation.
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