JAKARTA: Indonesia will increase its palm oil export tax to 3 per cent in January after holding it at zero for the past five months, said an industry source said yesterday.

An increase in the export tax was widely expected following a rise in prices. The 3 per cent export tax is based on a reference price of US$769.17 (US$1 = RM3.44) CIF Rotterdam, the source said.

However, industry officials have said that while the tax increase could make Indonesian palm oil products more expensive than those of its rival Malaysia, the increase is unlikely to hurt 2010 exports due to tight global supply.

Indonesia, the world’s top crude palm oil producer, will also raise the base export price for crude palm oil to US$694.60 a tonne, from US$623 in December, said the source who declined to be quoted by name.

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 to 25 per cent.

Diah Maulida, director general of foreign trade at the Trade Ministry, declined to comment.

Since November 2008, the government has raised the minimum reference price to US$701 a tonne, from US$550 previously, to help the industry withstand the impact of the global crisis.

Indonesian exporters have 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.

Indonesia’s palm oil output is expected to hit 23 million tonnes in 2010 in which around 70 per cent is exported. – Reuters Source: Business Times

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