THE Malaysia Estate Owners’ Association (MEOA) is calling various taxes on the oil palm industry “unfair” and is appealing for them to be suspended or abolished. These taxes include the windfall profit levy (WPL) on crude palm oil (CPO), 7.5% sales taxes in Sabah on sales of CPO, and 5% sales taxes in Sarawak on sales of CPO as well as crude palm kernel oil (CPKO).
MEOA, in a statement today, described the palm oil sector as the most heavily taxed in the country other than the “sin sectors” of gaming, tobacco and alcohol.
“In 2019, when the CPO prices were low, the taxes on the oil palm industry amounted to an estimated RM1.3 bil, an average of RM2,079 per tonne. Assuming CPO price sustains at RM3,200 per tonne, we expect these taxes could balloon to RM2.8 bil a year,” it said.
In an interview with Bernama last week, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said the imposition of a windfall tax on glove manufacturers would make investors think twice before investing in the country.
Referring to his remark, 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 the Malaysian Palm Oil Board (MPOB) chairperson Datuk Ahmad Jazlan Yaakub said that if the price of CPO was between RM3,000 and RM3,500 per tonne, WPL collections could amount to about RM500 mil in 2021, exceeding the RM400 mill that several glove manufacturers donated to the government’s COVID-19 Fund.
Meanwhile, MEOA urged the Sarawak state government to review the sales taxes 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, who are mostly are late starters vis-à-vis Peninsular Malaysia or Sabah planters in oil palm cultivation,” it said.
As for Sabah, the association requested the state government to consider the possibility of lowering or scrapping the 7.5% CPO sales tax, which amounted to an estimated RM791 mil last year. As the tax was on revenue rather than profits, MEOA calculated that this amounted to an outsize 44% of economic profits in 2019 when CPO prices were low.
MEOA said over the years, the oil palm sector had transformed Malaysia into a driving force in the global edible oil market while nurturing the national economy and remaining an indispensable economic pillar in the social-political landscape, especially in bringing development and creating well-being in the rural areas.
“The palm oil industry has remained steadfast, providing and sustaining employment opportunities, creating many multiplying and spin-off benefits, and generating significant foreign exchange for the country. Thus, all these aspects must be sustained to enable a win-win proposition for all relevant stakeholders,” MEOA added. – Dec 1, 2020
