Jakarta. Producers have flagged tax leakage concerns that can threaten Indonesia’s steel industry.

Finance Minister Purbaya Yudhi Sadewa recently revealed that 40 steelmakers had failed to meet their tax obligations, causing a state revenue loss of up to Rp 5 trillion ($282 million). Harry Warganegara, who chairs the Indonesian Iron and Steel Industry Association (IISIA), said that tax compliance was key in creating a sound business climate.

“If some business players are proven not to meet their tax obligations while other companies fully fulfill theirs, a disparity in cost structures will arise," Harry said.

The situation would give non-compliant steelmakers an unfair advantage.  The producers now not only have to compete with domestic competition, but also global pressures from global overcapacity and the influx of imports. The steel industry is grappling with rising costs across energy, raw materials, and logistics.

“If there are businesses who can gain lower costs not by efficiency, but by circumventing the mandatory obligations, the compliant companies will face increased pressure,” Harry remarked.

He went on to say that regulatory compliance must apply “equally to all businesses”, regardless of whether they are foreign or domestic investors. Amid the concerns, Industry Ministry spokesman Febri Hendri Antoni Arif acknowledged that compliance oversight was key in creating a “fair business climate and a level playing field”. 

“We urge industries to pay their taxes,” he said.

Purbaya claimed that the non-compliant steelmakers came from China. They failed to pay the value-added tax and income tax, according to Purbaya, saying that the government would take measures.

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