KUALA LUMPUR – The Malaysian Estate Owners’ Association (MEOA) is appealing for various taxes imposed on the palm oil industry to be suspended or abolished, calling them “unfair”.
The taxes referred to are the windfall profit levy (WPL) on crude palm oil (CPO), 7.5% sales tax in Sabah on CPO, and 5% sales tax in Sarawak on CPO and crude palm kernel oil (CPKO).
In a statement today, MEOA described the palm oil sector as the most heavily taxed in the country, other than the “sin sectors” of gaming, tobacco and alcohol.
“Collectively, they (taxes on the palm oil industry) amounted to an estimated RM1.3 billion in 2019 when CPO prices were low, averaging RM2,079 per tonne.
“Based on 2019 production numbers and assuming the CPO price sustains at RM3,200 per tonne, MEOA expects that these taxes could balloon to RM2.8 billion a year.”
Finance Minister Datuk Seri Tengku Zafrul Tengku Abdul Aziz, in an interview with Bernama last week, said the imposition of a windfall tax on glove manufacturers will make investors think twice about investing in Malaysia.
MEOA said: “We therefore ask whether the finance minister will expand this policy thinking to also exempt the palm oil industry from this tax.
“It should be pointed out that no oil palm planter will be rejoicing endlessly with today’s palm oil prices, given the cumulative effect of relentless cost increases over the years.”
Yesterday, Malaysian Palm Oil Board chairman Datuk Ahmad Jazlan Yaakub said WPL collections could amount to RM500 million next year if CPO prices are between RM3,000 and RM3,500 per tonne.
“In other words, WPL collections from the palm oil sector next year could exceed the RM400 million that several glove manufacturers donated to the government’s Covid-19 Fund.”
MEOA urged the Sarawak government to review the sales tax on CPO and CPKO, with the aim of reducing or abolishing them.
“These taxes on revenue rather than profits are a heavy burden on the sustainability of oil palm operations, especially when CPO prices are low, and on Sarawak planters, many of whom were late starters vis-à-vis Peninsular Malaysia or Sabah planters in oil palm cultivation.”
As for Sabah, the association requested that the state government consider the possibility of lowering or scrapping the 7.5% CPO sales tax, which amounted to an estimated RM791 million last year.
As the tax is on revenue rather than profits, MEOA calculated that it amounted to an outsized 44% of economic profits last year, when CPO prices were low.
“The industry has remained steadfast, providing and sustaining employment opportunities, creating many multiplying and spin-off benefits, and generating significant foreign exchange for the country.
“All these aspects must be sustained to enable a win-win proposition for all the relevant stakeholders.” – Bernama, December 1, 2020
