Diverted Profit Tax Schemes: Corporate Conscience and Reluctant Revenues
The taxing of multinational corporations is no easy task in this era of globalized capital, especially when national governments have to deal with corporate behemoths such as Google. However, as complicated as this issue can seem at first glance, the collection of such taxes is by no means an impossible task for Indonesia’s tax authorities. Taking its cue from the United Kingdom’s newly enacted diverted-profits tax scheme, the Indonesian government is optimistic that it can find a new solution to the thorny question of collecting taxes from corporations such as Google in ways that don't involve forcing them to register as permanent establishments within Indonesia. Can such schemes ultimately prove effective however? This edition of ILD will address this tangled question, as Indonesia considers incorporating its own diverted-profits tax scheme into its current tax regime.
Draft Bill on Tobacco
One of the most controversial draft bills in Indonesian legislative history has been incorporated into the 2017 national prioritized legislation program. Indeed, now that the Draft Bill on Tobacco has come to the attention of the general public after being officially initiated by the House of Representatives in mid-2016, the government just this week indicated its intention to suspend the House’s deliberations of the bill. Some believe that the Draft Bill is urgently needed in order to create a regulatory framework aimed at improving and boosting the national tobacco industry. However, others are of the view that the Draft Bill, in its current version at least, fails to address a number of important elements relating to the public interest, specifically health and poverty. This edition of ILD will analyze the Draft Bill and elaborate upon its key provisions.
Reclamation: Land from the Sea
As a way of mitigating the problems associated with land scarcity, the government, working in conjunction with the private sector, is currently engaged in a land reclamation project which is aiming to create new land from the sea. However, land reclamation is an issue that remains steeped in controversy and often leads to disputes between those who are initiating a given reclamation project and the residents who are evicted in order to make way for it. This edition of Indonesian Law Digest will present an in-depth analysis of the various issues affecting land reclamation, particularly as they apply in coastal areas and on small islands.
The Mandatory Use of the Indonesian Language in Contracts
The infamous Nine AM Case has shaken the foundations of contract law within Indonesia’s legal community. Through the handing down of a simple, yet direct and bold decision, the judges presiding over the Nine AM Case, from the District Court level all the way up to the Supreme Court, established that any agreements involving both Indonesian and foreign parties that do not also provide a version in Bahasa Indonesia should be annulled, as they are in violation of Article 31 of the Language Law. However, legal practitioners have argued that the underlying legal analysis as regards the Nine AM Case was not correctly implemented, as the obligation to use Bahasa Indonesia in International Commercial Agreements is considered a non-essential element and should thus not become the basis for any annulments or delegitimizations of contracts and agreements, as stipulated under Article 1320 (4) of the KUHPER. This edition of Indonesian Law Digest (ILD) will attempt to analyze this complex legal issue purely from the standpoint of legal theory, without offering any subjective opinions in relation to this issue.
Three New Ministerial Regulations on Electricity: Towards Equitable and Affordable Power
Recent data has revealed that a large number of Indonesians still do not have access to affordable electricity. In a bid to solve this stubbornly persistent problem, the government has set an electrification target of up to 70,000 MW by 2019 and is also aiming for the equal distribution of electricity at reasonable prices. With these two goals in mind, the Ministry of Energy and Mineral Resources has finally issued three new electricity-related ministerial regulations. These three regulations encompass Ministerial Regulation No. 10/2017 on Main Provisions for Power-Purchase Agreements, Ministerial Regulation No. 11/2017 the Utilization of Natural Gas for Power Plants and Ministerial Regulation No. 12/2017 on the Utilization of New and Renewable Energy. Regulation No. 10/2017 will now be the legal basis for the implementation of power-purchase agreements. Regulation 11/2017 has been issued in order to govern natural gas utilization by power plants, so as to secure gas and energy supplies at reasonable prices. Meanwhile, Regulation 12/2017 will act as a mandate through which PLN can purchase electrical power from any independent power producers that utilize renewable sources, in order to bolster national energy security.
New Legal Framework Governing Guarantee Services
In order to implement Law No. 1 of 2016 on Guarantees, the Financial Services Authority (Otoritas Jasa Keuangan- “OJK”) has finally issued three regulations, namely OJK Regulation No. 1/POJK.05/2017 on Business Licensing and the Organizational Structures of Guarantee Institutions; OJK Regulation No. 2/POJK.05/2017 on the Organization of Guarantee Institutions; and OJK Regulation No. 3/POJK.05/2017 on Good Corporate Governance for Guarantee Institutions. This week’s edition of Indonesian Law Digest (ILD) will analyze and discuss various matters which relate to these new OJK Regulations, such as the general concept underlying guarantee institutions, their licensing, financial ratios and so forth.
Indonesia & the World Trade Organization: Global Trade and Market Maneuvers
As the volume of international trade continues to rise year after year, naturally the number of trade disputes arising is also simultaneously increasing. Indonesia engages in significant amounts of international trade and thus when the country’s businesses import and export various goods to other WTO members, caution is required with respect to international trade principles and the WTO’s various legal instruments . This edition of ILD will offer a concise review of three of the most recent disputes which involved Indonesia’s status as a WTO member. These disputes were related specifically to clove cigarettes and fatty alcohols, as well as various horticultural and animal products.
Financial Soundness and Good Corporate Governance for Insurance Companies
In a bid to promote strong and stable financial environments, the OJK has issued three implementing regulations in order to enhance the management of insurance companies, as well as the various financial requirements that they are required to meet. The first two of these regulations concern the financial soundness of insurance companies and address solvency threshold levels, as well as a requirement to establish guarantee funds. Meanwhile, the last of the recently issued regulations relates to the implementation of good corporate governance within insurance companies and offers guidelines on the prudent operation of insurance businesses.
New Export Policy for Minerals and Coal: Export Ban Relaxed Once Again
Two weeks ago, Indonesia introduced new rules that will allow exports of nickel ore and bauxite, as well as concentrates of other minerals, under certain conditions in a sweeping policy shift from the key global supplier. These new rules are set out in Government Regulation No. 1 of 2017 on the Fourth Amendment to Government Regulation No. 23 of 2010 on the Implementation of Mineral and Coal-Mining Activities, Ministerial Regulation No. 5 of 2017 on the Enhancement of the Added Value of Minerals Through Domestic Mineral Processing and Refinement Activities, Ministerial Regulation No. 6 of 2017 on Procedures and Requirements for the Granting of Recommendations for the Sale of Processed and Purified Minerals Overseas, and Ministerial Regulation No. 7 of 2017 on Procedures for the Designation of Sales Benchmark Prices for Metal Minerals and Coal. With these changes in mind, this week’s edition of ILD will address matters which relate to Indonesia’s latest mining policy, including its new divestment scheme, export procedures for metals and coal, requirements for the securing of export recommendations and benchmark pricing.
New Regulations on Insurance/Reinsurance: Establishment & Organization of Businesses
Two years after the enactment of Law No. 40 0f 2014 on Insurance, the Financial Services Authority (OJK) has finally introduced two regulations relating to the insurance sector, specifically OJK Regulation No. 69/POJK.05/2016 on Business Licenses and the Organizational Structure of Insurance, Sharia-Insurance, Reinsurance and Sharia-Reinsurance Companies; and OJK Regulation No. 67/POJK.05/2016 on the Organization of Insurance, Sharia-Insurance, Reinsurance and Sharia-Reinsurance Companies. Against this background, this week’s edition of ILD trains its precision spotlight upon the establishment and organization of businesses operating within Indonesia’s insurance sector.