Counter-productive to impose RM5 cess in trying times

THE introduction of the RM5 cess at a time when the palm oil industry is still struggling to recover from the impact of the COVID-19 pandemic will pose a financial burden to the industry and its supply chain.

While lauding the effort by the Malaysian Palm Oil Board (MPOB) to intensify research and development for mechanisation and automation in the upstream sector, the Palm Oil Refiners Association of Malaysia (Poram) has opposed the proposed introduction of the extra RM5 per metric tonne cess.

After all, there is already a current cess rate of RM14 per metric tonne imposed, according to Poram chairman Jamil Haron.

“If implemented (the new MPOB Cess Order 2020), making a total of RM19 per metric tonne – albeit for only a year – it will have far reaching consequences resulting in Malaysian refined palm oil products being rendered uncompetitive in the international market,” he pointed out in a media statement.

“The additional cost in cess collection will be passed on to the refining industry.”

Moreover, Jamil said the palm oil industry has already been saddled over the years by a high corporate tax, windfall tax and sales tax imposed by the respective state governments of Sabah and Sarawak.

“As it is, we are already losing market share in refined palm oil products to Indonesia due to their favourable export duty structure,” he argued.

“The introduction of an additional RM5 will only add to the operating cost of crude palm oil (CPO) and this will indirectly squeeze the Malaysian refiners further by operating at negative margins in most cases.”

Considering the uncertain market condition currently, Jamil suggested that the Government utilises part of the windfall tax to fund the said R&D programme instead of pinning down the recovering palm oil industry with the proposed cess.

In early November, the government announced that the Malaysian palm oil industry is estimated to contribute about RM348 mil from the windfall tax for this year.

“While the figure is admirable, the palm oil industry only broke the taxable barrier for windfall tax for only six months over the last three years,” he justified.

“The palm oil industry was beset with low CPO prices since 2018 and it was only compensated by a positive price rally since the second half of this year.” – Nov 30, 2020

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