Reuters: Indonesia scraps land tax on oil and gas exploration

Indonesia has scrapped a land tax that companies pay while exploring for oil and gas, a move that might encourage exploration at a time of concern that it could fall sharply due to tumbling oil prices.

According to a ministerial decree posted on the Finance Ministry's website, the tax office is no longer assessing a 0.5 percent "land and building tax" charged on the area in which companies are carrying out exploration activities, effective from Jan. 1.

Wahju Tumakaka, spokesman for the ministry's tax office, said the interpretation used for taxing exploration areas was wrong, thus the ministry amended the regulation.

The tax "is supposed to be applied for those using Indonesian land. In terms of the oil and gas sector, it should only be applied during production stage," Tumakaka told Reuters.

He said that in 2014, the land and building tax from oil and gas exploration and production work brought in about 18 trillion rupiah ($1.43 billion), or 1.2 percent of total government revenue. No breakdown of what percentage came from just oil exploration was available. MORE