Landmark Tax Ruling Against Palm Oil Industry (A TBI ‘Investor’)

This really interesting article appeared in The Jakarta Globe a few days ago. It appears that in a first for Indonesia, the Supreme Court has forced big business to actually pay tax to the State. This has been creating a lot of waves in financial circles, where it has traditionally been assumed there is almost no need for palm oil and coal interests (both of whom are heavily involved behind the scenes in TBI) to comply with tax laws. Here’s the JG article:

Palm oil giant Asian Agri said on Thursday it may appeal against an Indonesian Supreme Court order to pay $389 million for tax evasion in the graft-ridden nation’s first major corporate tax prosecution.

The court in December found Asian Agri, one of Asia’s biggest palm oil producers, guilty of “deliberately not filling tax forms properly between 2002 and 2005”.

It ordered the company to pay 3.78 trillion rupiah ($389 million), comprising 1.26 trillion rupiah in unpaid taxes and a fine of 2.52 trillion rupiah.

In Indonesia the last legal option beyond a Supreme Court ruling is judicial review, which requires appellants to present fresh evidence.

“Definitely judicial review is an option, and we may do it after studying the ruling,” Asian Agri general manager Freddy Widjaya told AFP in Jakarta.

The company — a subsidiary of Singapore-based conglomerate Royal Golden Eagle (RGE) — said it had commissioned an independent audit that found no irregularities in its tax payments.

In a statement sent to AFP, the company said it had been a “significant tax payer” between 2002 and 2005, “and is firmly convinced that it has filed and paid the correct amount of taxes in accordance with the regulations”.

Asian Agri argued that during the period in question, its total profits were 1.24 trillion rupiah, around the same amount it was asked to pay in tax, or “an effective tax rate of 100 percent”, the statement said.

The Supreme Court judge said at the time of the ruling the case would set a precedent for at least nine major tax crime cases in the pipeline.

The case began in 2006 when a former financial controller at the company — Vincentius Amin Sutanto, accused of embezzling $3.1 million from the firm — reported that the company had evaded tax.

A Jakarta court in 2007 jailed Sutanto for 11 years on charges including laundering money and falsifying signatures.

The tax office could not immediately be reached for comment.

Asian Agri, which controls more than 160,000 hectares (400,000 acres) of palm oil plantations on Indonesia’s Sumatra island, exported three million tonnes of the oil in 2011, according to its website.

Its parent company RGE is owned by Sukanto Tanoto, Indonesia’s seventh-richest tycoon, according to Forbes, and its subsidiaries produce pulp and paper, gas and oil.

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