Planters disappointed over lack of tax relief

KUALA LUMPUR: Oil palm plantation companies are disappointed at the total lack of tax relief for the industry in the recently-announced 2012 Budget.

In making things worse, the already heavily-taxed sector has been slapped with an additional 1 per cent Employees Provident Fund (EPF) contribution.

"We're deeply disappointed at the total lack of tax relief for planters. 

"Already, the oil palm sector is most heavily-taxed in the country and we're still made to subsidise cooking oil," said Malaysian Estate Owners Association (MEOA) president Boon Weng Siew. 

"The higher EPF contribution is adding to the burden," he told Business Times in an interview here recently.

Cooking oil subsidy in Malaysia is being funded by a windfall profit levy imposed on oil palm estate bigger than 40 hectares. Smallholders and Felda settlers are exempted.

From May 2007 to September 2011, MEOA estimated that estates had paid more than RM4 billion to subsidise the price of cooking oil, which is capped at RM2.50 a kg against the open market price of more than RM4.70 a kg in Thailand, Singapore and the Philippines.

"We expected favourable response from the Finance Ministry to review the windfall profit levy but were disappointed that there was no mention of it in the 2012 Budget," said Boon.

Earlier this year, MEOA, Malaysian Palm Oil Association (MPOA), East Malaysia Planters' Association (EMPA) and the Sarawak Oil Palm Plantation Owners' Association (SOPPOA) jointly appealed to Prime Minister Datuk Seri Najib Razak for a review of the windfall tax.

The levy is seen to be unfair and inequitable because it is imposed on assumed profit and not on actual profit when the price of CPO exceeds RM2,500 a tonne for Peninsular Malaysia and RM3,000 a tonne for Sabah and Sarawak. Plantation companies' profits vary according to the age of the palms.

Newly-developed plantation or green fields and areas under replanting, do not make any profit in the initial year of harvest of fresh fruit bunches. "From the fourth to the seventh year, the proceeds from fresh fruit bunches sales are hardly adequate to recover planting and maintenance costs of around RM12,000 a ha," said Boon.

Oil palm planters are proposing a gradual abolition of the windfall profit levy, commencing with the exemption of estates having oil palms aged seven years and below. This can tie in with a gradual reduction of the cooking oil subsidy like that on other necessities, such as petrol, diesel, rice and sugar.

They urged the government to review the cooking oil subsidy, which is benefitting restaurant operators, traders and people across the border more than the the hardcore poor as reflected in the frequent media reports of cooking oil shortage in the country.

This is in spite of the huge quantity of 70,000 tonnes of cooking oil being subsidised monthly against the total estimated household consumption of only 40,000 tonnes a month.

The price of palm-based cooking oil should be allowed to float in the open market, they argued.

Cooking oil vouchers can be issued to hardcore poor households to mitigate the impact on them. "Removing cooking oil subsidy should be viewed in a positive light because it will prompt wise consumption of oils and fats. This is in line with the advice of the Health Ministry," said Boon.

As lawmakers in the country prepare for their next debate session, MEOA is appealing to members of Parliament to consider abolishing the windfall tax as provided under Windfall Profit Levy Act 1998. "Alternatively, lawmakers may want to consider imposing it across the board to cover all industries based on actual profit, say a threshold of 20 per cent return on investment instead of singling out the palm oil industry to impose the levy," he added.

One Response to Planters disappointed over lack of tax relief

Leave a Reply