Small and medium oil palm planters’ wishlist

PRESSING “old” issues hampering the progress of small and medium oil palm plantation operators must be taken seriously in the preparation of Budget 2010, set to be tabled in Parliament this October.

With the cost of production creeping up and crude palm oil (CPO) prices fluctuating, the Government should reconsider planters’ proposals for a full abolition of the windfall tax and a reduction in the Sabah CPO sales tax.

Equal attention must also be given to the inconsistent imposition of the levy on foreign workers, measures to encourage palm oil production and a new policy for the rubber sector.

Many planters feel the current imposition of levy based on fresh fruit bunches (FFB) produced is unfair as not all plantations are making windfall or extraordinary profits despite recent higher CPO prices at RM2,500 per tonne for the Peninsular and RM3,000 for Sabah and Sarawak.

An estate with a large area under replanting is likely to face negative cashflow while a “greenfield” plantation does not have any profit even if the CPO price hit RM3,000 per tonne.

The Government should consider a repeal of the Windfall Profit Levy Act, 1998, which is a form of double taxation and considered a deterrent for both local and foreign investments.

The windfall profit levy on CPO price in excess of the threshold price at the rate 15% is equivalent to an additional tax of 15% above the corporate income tax of 26%, making it a total of 41%!

The Sabah CPO sales tax should also be reduced due to the high costs of fertilisers, chemicals, fuels and foreign labour recruitment, as well as escalating transport costs caused by lack of public excess roads to plantations and extra freight charges in the form of discounts on the purchase prices of CPO and palm kernels.

Sabah planters claim there have been no apparent improvements in port facilities and public excess roads to plantations despite the billions of ringgit contributed through the CPO sales tax.

Instead of imposing the sales tax on planters, Sabah should seek appropriate allocations from Federal funds to finance its infrastructure development.

There is also grave concern over the inconsistency on the levy imposed on the recruitment of foreign workers.

Generally, it costs the plantation sector about RM3,000 to recruit and bring in each foreign worker into the peninsula and around RM3,800 in Sabah, in addition to the high risk of foreign workers absconding.

Planters are now hoping the Human Resource Ministry would adhere to the original principle of the levy on foreign workers.

This includes revoking the order forbidding plantation employers to deduct the levy from the monthly wages of foreign workers recruited after April 1 and to reduce Fomema annual medical check-ups for foreign workers from three times to one time, and only for the first year of employment.

Another proposal is that maximum attention be given to efforts to improve palm oil productivity per unit area through replanting with high yielding materials.

In this connection, an appropriate national replanting policy should be formulated with the industry to ensure sustainable growth.

● Hanim Adnan is assistant news editor at The Star. She hopes to see at least three proposals by planters make it in the upcoming Budget 2010.

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