In Indonesia, mining companies pay royalties and PHT directly to the Treasury. Upon payment, companies are obliged to submit the payment slip to the General Directorate of Mineral and Coal and to the local government. The 2010-11 EITI Report revealed that not all mining companies submit the payment slips to the Directorate, resulting in the payment not being recorded in the central government system. In some cases, the government had also erroneously recorded corporate income tax payments as royalties in their systems. In other cases, both the companies and the Directorate had used a different formula for calculating royalties. Given that a portion of royalties is transferred back to the producing region, this weakness in recordkeeping may have caused errors in the revenue sharing with provinces.
The 2010-11 EITI Report recommended that the proof of payment by mining companies should include clear and accurate information, especially on the detail of calculating Coal Production Contribution into royalty and PHT, to avoid errors in revenue sharing with producing regions. It also recommended that there be more streamlined recordkeeping between Treasury, the General Directorate of Mineral and Coal, and the General Directorate of Accounting and Financial reporting.
The 2012-13 EITI Report showed that accounting errors still occur in this area. The incompatibility between the accounting systems of the Ministry of Finance and the General Directorate of Mineral and Coal continues to cause delays in revenue sharing with local governments. The 2012-13 EITI Report recommended that the government creates an integrated payment and reporting system to eliminate the accounting differences. The report was published in November 2015. The government and Indonesia´s multistakeholder group have not yet had the opportunity to consider this recommendation.
* Sales Revenue Share (PHT) is Coal Production Contribution (13.5%) less Royalty.