JAKARTA: Indonesia, the world’s top crude palm oil (CPO) producer, may hike the export tax to 3 per cent in January from zero now because of higher prices, but the move is unlikely to hit exports given tight global supply.

Trade ministry and industry officials meet every month to decide the tax rate for the following month, using the average spot CPO prices in Rotterdam in the preceding 30 days as a reference price. Their next meeting will take place next week.

“As palm oil prices are predicted to continue to rise to RM3,000 per tonne next year, we expect the export tax to rise further due to the progressive tax system,” said head of the marketing division at the Indonesian Palm Oil Association (Gapki) Susanto Yang.

The existing CPO export tax system, aimed at safeguarding domestic supply and reducing volatility in cooking oil prices, allows the government to impose tax rates from 1.5 per cent to 25 per cent.

Since November 2008, the government has raised the minimum reference price to US$701 per tonne, from US$550 per tonne (US$1 = RM3.43) previously, to help the industry withstand the impact of the global crisis.

Since then, exporters had only paid tax in June and July as palm prices remained low for most of the year. Prices began to pick up from October, when the rainy weather started to hurt Malaysian output, and have surged 19 per cent since end-October.

Benchmark Malaysian palm oil futures hit an intraday high of RM2,628 per tonne on Thursday, a level not seen since June 2.

Industry officials said the tax hike, which could make Indonesian palm oil products more expensive than Malaysia’s products, will not hurt 2010 exports. – Reuters Source: Business Times

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