Indonesia Keeps Digging

By Global Tax Weekly

“Hard-Faced Intermational Mining Behemoth Grinds Down 3rd-World Workers.” Sounds all too probable, yes? “Corrupt Government Reneges On International Mining Contracts.” Sounds even more probable, and there have been lots of cases of that lately. If you don’t pay the Ministers then they’ll chuck you out; and if you do, you’ll end up in Leavenworth. Who’d be a mining executive? Now of course none of the above applies to the saintly mining companies who are helping Indonesia to exploit, sorry, manage, its mineral resources; and of course Indonesian ministers are the cynosure of probity. So how to explain what’s going on with Indonesian mining? Presumably the (non-Indonesian) mining companies employ tens of thousands of local workers, and if they are modern, socially responsible companies, no doubt they have an entirely paternalistic attitude towards those workers (no, I am not being sarcastic, it is just how you need to be, nowadays). And not incidentally, they transparently pay vast sums to the government every year through various types of tax. And the Government? It is reasonable to want to trade up, to add value to the resources you have, to increase the skill levels of your citizens, all that good stuff. And why would the mining companies not want to go along? Surely it is in their interest to secure their place in the value chain by having a bigger and more sophisticated stake in the country? So, with all these win-win outcomes, why is it that the mining companies and the Government are at each other’s throats? Obviously I am missing something; there must be an obvious answer. But I can’t see it. Unless it would be tax? The Government claims that it is not trying to increase its revenues, but to better the country. Well, that’s a first! But it does seem strange that their method of encouraging investment is to apply a sort of fiscal Iron Maiden to their biggest taxpayers. Colbert would not have approved: what they’re getting is all hiss and no feathers.

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