Windfall tax on CPO stays

Ever wonder how is the government going to find the money to fund the RM67 billion stimulus plan so that we can spend our way out of an economic recession?

Apart from the issuance of the RM10 billion 'Sukuk Simpanan Rakyat' and oil royalty from Petronas, the government will also collect money from oil palm estate owners. Ten years ago, windfall tax paid by oil palm planters helped our economy ride out the Asian Financial Crises.

This proves that, in times of need, oil palm planters are, indeed, a dependable lot.

The oil palm industry is increasingly becoming a significant foreign earnings contributor. Last year, the RM65 billion palm oil shipments made up 9 per cent of the nation's total exports.

More importantly, this industry is providing jobs to more than 500,000 people in the estates and livelihood to an estimated one million people. Apart from government-linked companies and private estates, there are close to 300,000 smallholders whose daily income is reliant on the rise and rise of international palm oil prices.

THE government, yesterday, shot down appeals to abolish windfall tax on crude palm oil (CPO) put forward by the Malaysian Estate Owners Association.

"I believe the average production cost is around RM1,600 per tonne. At the current crude palm oil pricing of RM2,600 per tonne, there is still quite a bit of margin for planters," Prime Minister Datuk Seri Najib Razak told reporters after witnessing Sime Darby's achievement in oil palm genomics research.

The Finance Ministry will start collecting windfall tax next month from estates in Peninsular Malaysia as soon as CPO averages above RM2,500 per tonne this month.

The Malaysian Estate Owners Association had recently appealed for the government to revoke the tax as it is seen as a deterrent for new investments.

In Sabah and Sarawak, the threshold level is RM3,000. Previously, it was RM2,000 for the whole country.

It is estimated that the government has collected some RM400 million since the tax was introduced in July 2008. In the three months to September, oil palm estate owners in the peninsula paid 15 per cent tax while those in Sabah and Sarawak paid 7.5 per cent. Subsequently, from October last year to now, palm oil prices have been rising. Since it was trading below the threshold levels, the windfall tax was not applicable.

This month, however, palm oil futures had started to trade above RM2,500 per tonne.

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