PETALING JAYA: Local plantation companies are now pushing for the abolishment of the crude palm oil (CPO) windfall profit tax (WPT) on the heels of the Government’s well-lauded move to impose the new CPO export duty and abolishment of the duty-free CPO export quota early this year, said industry players.
At present, once the CPO price reached the threshold of RM2,500 per tonne or above, Peninsula-based oil palm plantation players would be imposed a 15% WPT. Where Sabah and Sarawak oil palm planters are concerned, a 7.5% WPT would be imposed should the CPO price hit the RM3,000-per-tonne level or above.
United Malacca Bhd chief executive officer Dr Leong Tat Thim toldStarBiz that the palm oil industry was generally against the WPT because it was based on CPO production and not on the actual profit of the plantation companies.
“Newly established plantation companies, especially in Sabah and Sarawak with an average annual yield of less than 10 tonnes per ha, would find the WPT unfair, as many of them had yet to break even, or were still not making enough profits to recover their land development costs,” he said.
Under such a scenario, Leong rationalised that it was, indeed, “unjustifiable” to impose the WPT on the newly developed oil palm plantation companies when they were still making losses.
For well-established oil palm plantation companies, meanwhile, he said: “When they make profits, they are subjected to the normal 25% corporate income tax.
“So, when these companies make more profits by producing more crop, they are paying additional contributions at the corporate tax level.
“Yet, they too would have to pay the WPT when the monthly average price of CPO exceeded RM2,500 per tonne in Peninsular Malaysia and RM3,000 per tonne in Sabah and Sarawak.”
Therefore, it was indeed a punitive tax on the domestic palm oil sector, said Leong.
Meanwhile, IJM Plantations Bhd chief executive officer Joseph Tek personally thinks that abolishing the CPO WPT at the current juncture would not be of significance, as “the present CPO prices are well below the threshold to trigger the WPT”. However, he concurred that the WPT should be removed as “a matter of principle” and for better governance towards a fairer and more equitable taxation standard based on the actual profits of the plantation companies rather than benchmarking it on current CPO prices.
Furthermore, Tek said that with the new CPO export duty structure, it would only serve as additional taxes payable by planters via the millers if or when the CPO price bounced back above the threshold WPT prices.
“At the moment, it is already tangible that the cost of production has increased significantly for oil palm planters.
“This includes the impact realised from the recent introduction of minimum wages without any real gain on productivity as well as other cost inputs,” he said.
According to Tek, the Malaysian palm oil industry was one of the few examples of an agricultural reality in the developing countries that could still successfully compete with the highly protected or subsidised farmers in the G7 countries without any government subsidies.
“However, if local plantation companies are not vigilant, the cost escalation, including the various forms of taxes introduced, could add to the burden and jeopardise our competitiveness,” he noted.
Malaysian Estate Owners Association president Boon Weng Siew, meanwhile, said his association members were largely small and medium-sized estates nationwide.
He pointed out that the revenue to be generated from the new CPO export duty could be well utilised for the benefit of the local palm oil industry, such as financing the cooking oil subsidy in tandem with the concurrent abolition of the flawed WPT imposed on big plantation companies.
In addition, the potential revenue could, in a way, compensate local upstream players with palm oil refineries overseas from the loss arising from being the recipients of the duty-free CPO export quota.
Source : The Star
