Oil palm planters seek tax waiver

Oil palm planters in Sarawak are appealing to the government for a waiver of the windfall tax on crude palm oil (CPO).

Oil palm planters in Peninsular Malaysia had been paying windfall tax when CPO prices went beyond RM2,500 per tonne in the cash market. Planters in Sabah and Sarawak will soon pay the windfall tax as the average monthly cash price surpasses RM3,000 per tonne.

Yesterday, CPO futures on the Bursa Malaysia derivatives market closed RM82 higher at RM3,273 per tonne.

In a statement released yesterday, Sarawak Oil Palm Plantation Owners Association (Soppoa) chairman Datuk Abdul Hamed Sepawi said it is unfair to levy a windfall tax on CPO, a commodity which is subjected to many factors in the international market beyond planters' control.

"In the normal boom-and-bust cycle of commodity trading, a sudden jump in price is not considered a windfall," he said.

He then explained the profitability of oil palm plantations depends on the age and productivity of oil palm trees.

"It takes 10 to 12 years before a new estate can recoup its initial investment. So, a newly-planted estate would still be losing money even if palm oil prices surpass RM3,000 per tonne," he said.

Hamed said the formulation of the windfall tax is flawed because it is based on the CPO selling price instead of actual profits. "How can we pay windfall tax when we have not even made any profits?" he asked.

Palm oil is already the world's most heavily-taxed vegetable oil, with oil palm planters having to pay 25 per cent corporate tax, cess amounting to RM13 per tonne of CPO, as well as 7.5 per cent and 5 per cent sales tax in Sabah and Sarawak respectively. Also, there are varying import duties in countries that buy palm oil.

When compared to businesses in other sectors that just pay 25 per cent of corporate tax, oil palm planters have had to pay more.

When all the cess and taxes are added up, planters in Peninsular Malaysia pay an effective tax rate of 26 per cent.

In Sabah and Sarawak, it is even more punishing. For every RM1 an oil palm planter in Sabah earns, he is paying 40 sen in total cess and taxes, while in Sarawak, the amount is 37 sen.

2 Responses to Oil palm planters seek tax waiver

  1. Not a very convincing argument for the removal of windfall profit levy just because you can't manage plantations efficiently.
    However, it's true indeed that this industry is overly taxed especially considering the fact that it's contributing to the well being of human kind.

    Who will help them when prices fall?

  2. Your words "just because you can't manage plantations efficiently" shows that you're quick to make assumptions and do not understand about tree profile and costing.

    Again..... "who will help them when prices fall?" is also a stupid question because all farmers (except those who are heavily subsidised by taxpayers money in Europe and USA)are exposed to the normal boom and bust cycles of commodity trade.

    Get your facts right, dum dum.

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