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Allocating and taxing rights to state-owned minerals

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  • George Fane

Abstract

Is Indonesia using the most effective possible strategies to derive revenue from its mineral resources? Auctions and work program bidding are the main ways of allocating mineral leases. In addition to the company taxes applied to all companies, governments can raise revenue from minerals owned by the state through auctions, royalties and rent taxes paid by private firms, and through dividends from state-owned firms. Indonesia uses work program bidding to allocate leases, and its production-sharing contracts are roughly equivalent to a rent tax at a high rate. This paper considers these options for raising revenues from mineral resources. It argues that efficiency and government revenue would both be increased if Indonesia relaxed direct controls on the operations of mining companies, and allocated leases by means of auctions, combined with a much lower rate of rent tax or, better still, a royalty.

Suggested Citation

  • George Fane, 2012. "Allocating and taxing rights to state-owned minerals," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 48(2), pages 173-189, August.
    • Handle: RePEc:taf:bindes:v:48:y:2012:i:2:p:173-189
    DOI: 10.1080/00074918.2012.694153
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    Cited by:

    1. Jason Allford & Moekti P. Soejachmoen, 2013. "Survey of recent developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 49(3), pages 267-288, December.
    2. van der Eng, Pierre, 2014. "Mining and Indonesia’s Economy: Institutions and Value Adding, 1870-2010," PRIMCED Discussion Paper Series 57, Institute of Economic Research, Hitotsubashi University.
    3. Yıldız, Taşkın Deniz, 2022. "How can the state rights be calculated by considering a high share of state right in mining operating costs in Turkey?," Resources Policy, Elsevier, vol. 75(C).
    4. Li, Yiming & Li, Changqing, 2019. "Fossil energy subsidies in China's modern coal chemical industry," Energy Policy, Elsevier, vol. 135(C).

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