House tells AGO to speed up Adaro investigation

Ridwan Max Sijabat, The Jakarta Post
http://thejakartapost.com/detailbusiness.asp?fileid=20080114.L02&irec=1

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. (*)