Sarawak oil palm firms say it is unfair to burden new players with taxes based on CPO prices
PETALING JAYA: Oil palm planters in Sarawak want a more “realistic” tax regime for the palm oil industry.
This is especially for new planters with immature hectarage who also have to pay the hefty taxes, levy and cess imposed by the Federal and State Governments.
Sarawak Oil Palm Plantation Owners Association (SOPPOA) chairman Datuk Abdul Hamed Sepawi said it was unfair to burden new planters with taxes based on the price of crude palm oil (CPO) as many of them were not even generating profits.
Given the shortage of mature areas, the cost of production among Sarawak planters is also the highest in the country at RM1,700 to RM2,000 for a tonne of CPO compared with RM1,100 to RM1,200 for the more efficient planters in Peninsular Malaysia.
“We hope the proposed goods and services tax will improve our tax exposure.
“The palm oil industry is relatively new in Sarawak but it will grow to be the state’s biggest employer in the near future,” Hamed told StarBiz via e-mail.
SOPPOA members currently pay income tax on their profits as well as other tax, cess and levy which are based on the price of CPO.
The cooking oil subsidy is based on revenue and not profit while the windfall tax on palm oil producers is based not on profit but on CPO prices.
The GST would be an opportunity for the Government to relook at all palm oil-related tax, levy and cess and bring them together based on profit rather than on the price of CPO, Hamed added.
“Oil palm estates suffer from labour shortage which leads to fresh fruit bunches (FFB) left to rot uncollected. This wastage could be around 10%,” he said.
Considering Sarawak is targeting one million hectares of oil palm estates, and a productivity of 25 tonnes of FFB per ha, this wastage translates into 2.5 million tonnes.
An average price of about RM500 per tonne, this comes up to a staggering RM1.25bil worth of lost exports for Sarawak, according to Hamed.
The Sarawak Sales Tax imposes a 2.5% tax rate on CPO prices above RM1,000 and 5% for prices above RM1,500 per tonne.
Sarawak plantation groups like Rimbunan Sawit Bhd and Ta Ann Holdings Bhd also want a full review on palm oil taxes.
Rimbunan Sawit managing director David Tiong said: “I feel the present taxes and others that we are paying are excessive and unfair to newcomers in Sarawak.”
Ta Ann managing director Datuk K.H. Wong noted that “we are not only paying additional tax of up to 40%, but over 100%, considering the fact that we are already paying tax when no profit has been generated yet.”
He pointed out that the Government failed to realise that it lost billions of ringgit in revenue each year from the acute shortage of foreign workers that are needed to harvest the FFB in the estates.
The Malaysian Estate Owners Association president Boon Weng Siew said the plantation sector was facing problems on the recruitment of foreign workers due to the wrong perception that wages of plantation workers were not high enough to attract local workers.
Wages for oil palm harvestors, varying from RM1,000 to RM2,000 a month depending on productivity, were not low, he said.
The cost of recruiting foreign workers is about RM3,000 per worker for three years and around RM3,800 in Sabah and Sarawak due to higher agency fees.
The levy of RM540 per worker per annum was initially borne by foreign workers through monthly deductions from their wages.
However, since April 2009, deduction from the worker’s wages is not allowed as the levy must now be borne by the employer.
Boon said the industry was appealing to the Government to revert to its initial practice of having the foreign workers bear the levy.
Source: The Star by Hanim Adnan
