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Indonesia eyes revision in crude palm oil tax structure

Publication Date : 28-05-2014

 

Indonesia's Industry Ministry is finishing its assessment of the taxes imposed on palm oil and palm oil derivatives, which may result in the revision of some export tariffs to further spur growth in the downstream industry.

Industry Ministry director general for agriculture and chemical industries Panggah Susanto said the assessment also covered the tax structure on palm oil products considered to have higher added-value and bright sales outlook.

“We will see how the export tax structure and incentives can be directed to further encourage production of downstream products with good prospects,” Panggah said Monday during a palm oil conference.

The ministry also examined the need to maintain export tax for some downstream products, which were in high demand domestically, such as biodiesel, he added.

The Industry Ministry’s idea will soon be discussed by related ministries under the coordination of the Office of the Coordinating Economic Minister and is subject to the Finance Ministry’s approval.

Indonesia, the world’s biggest palm oil producer, imposes a progressive export tax on palm oil and its processed products, the tax begins at 22.5 per cent when the price goes beyond US$750 per ton.

Refined palm oil products are subject to lower taxes compared to crude palm oil (CPO).

The commodity now sells for about $900 per ton and the Trade Ministry on Monday said the 12-per cent export tax imposed on it would be kept through June.

Since the introduction of the new tax structure in late 2011 along with tax incentives such as tax holiday and tax allowance, Indonesia has seen investment in the downstream industry reach 24 trillion rupiah (US$2 billion) up to present, according to the Industry Ministry.

That included a $133-million oleochemical refinery in Sei Mangke, North Sumatra, by Unilever Oleochemical Indonesia, a subsidiary of consumer goods giant Unilever Indonesia.

The variety of processed products has also risen from 54 types to 149 during the designated period. In line with that, exported palm oil products has also seen a reversal with 70 per cent of all palm oil shipped overseas being processed products.

Malaysia and India, big buyers of Indonesian CPO, have reacted by changing their import taxes for palm oil products, particularly olein, following the Indonesian tax structure, which sides with its own downstream industry.

Apart from changing the tax structure, the review also aims to improve the technical aspect of its implementation, according to Industry Ministry director for standardisation and technology of forestry and plantation products Lila Harsyah. Currently, unclear product description has caused misidentification of the commodities to be taxed.

“With this revision, we want to minimise disputes that stem from wrongly assigned export taxes,” he said.

In response to the Industry Ministry’s proposal, Deputy Trade Minister Bayu Krisnamurthi welcomed the move, saying that his ministry was open to such a review and would carefully study the proposal from the Industry Ministry.

“We will also carry out our own analysis by paying attention to market developments, demand and competitors,” he said.

 

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