Planters call for lower taxes in Budget 2019 amidst tough outlook

KUCHING: Palm oil industry players in Sabah and Sarawak call for a review of the industry’s many heavy taxes in the upcoming Budget 2019 to ensure the long-term sustainability and competitiveness of Malaysia’s palm oil.

This is pertinent especially when the outlook for the industry remains tough due to a volatile crude palm oil (CPO) prices and irregular weather patterns such as El Nino affecting production.

The Dayak Oil Palm Planters Association Sarawak (DOPPA) suggested that the government look into the introduction of subsidy scheme or tax and cess exemption to smallholders when CPO price drop below RM2,500 per metric tonne (pmt).

“Similarly, when the price (of CPO) is above RM3,000 pmt, smallholders too will have pay the windfall tax/levy to goverment,” it said in a statement to thesundaypost.

In previous years, similar calls were made by the Sarawak Oil Palm Plantation Owners Association, who called for a more “realistic” tax regime for the palm oil industry back in 2010.

Among the many costs borne by industry players include the Malaysian Palm Oil Board’s (MPOB) cess of RM11 per metric tonne (pmt) for CPO and crude palm kernel oil (CPKO), MPOB price stabilisation tax of RM2 pmt for CPO and CPKO, as well as a windfall profit levy which is charged at a rate of 15 per cent on palm oil prices above RM2,500 per tonne in Peninsular Malaysia and 7.5 per cent when CPO prices exceed RM3,000 in Sabah and Sarawak.

These do not include other costs that Sabah and Sarawak companies face such as corporate taxes, freight costs as well as taxes to the state governments. There is also a CPO export tax structure ranging between 4.5 to 8.5 per cent, based on an established CPO price matrix.

The Minimum Wage Order 2016 contributed to a further rise in cost for planters as it raised minimum wages by 11 per cent in Peninsular Malaysia from RM900 to RM1,000 and 15 per cent in Sabah and Sarawak from RM800 to RM920.

“Currently, the direct costs of fresh fruit bunch (FFB) production for smallholders averaging around RM200 to RM220 per mt FFB for palm age above six years,” DOPPA continued.

“They face higher costs of production between RM280 to RM300 for palm oil below six years of age, due to low production and depending on location and transport to cost.

“The ministry should look into financial assistance and replanting/new planting subsidy to smallholders particularly Sarawak where there are plenty of native lands to be developed.

“The ministry should also look at flexibility of import tax by foreign country in order to stabilised CPO market and benefits the industry.”

Primary Industries Minister Teresa Kok has yet to respond to comments on this topic.

According to an industry observer, Malaysia’s palm oil industry competes in a global market against other edible oil industries such as soybean and olive oil. As such, a higher CPO cost structure erodes the country’s competitiveness when compared to producers in other countries.

This will have adverse implications for the sustainability of the industry in Malaysia in the long run.