Review levy threshold

  • Business
  • Thursday, 13 Oct 2016

Plantation company chief says RM2,500 per tonne no longer a ‘windfall’

KUALA LUMPUR: The chief executive of a leading plantation company has called on the Government to review the existing threshold price for the windfall profit levy on crude palm oil (CPO) to RM3,000 per tonne.

IOI Corp Bhd chief executive officer Datuk Lee Yeow Chor (pic), who is also the Malaysian Palm Oil Council (MPOC) chairman, said the last revision of the price threshold of RM2,500 per tonne was set in 2009.

“Production costs have also gone up and we (the plantation companies) hope the Government can review and raise the threshold to RM3,000 per tonne.

“At today’s production cost, the RM2,500 per tonne is not considered a price level that brings about a ‘windfall profit’ to plantation companies anymore,” he said.

“We hope that the price threshold can be reviewed to perhaps RM3,000 per tonne or more,” he told a press conference during the Palm Oil Trade Seminar 2016 here yesterday.

For peninsula-based oil palm plantation companies, a 15% windfall profit tax is imposed when the CPO price threshold reaches RM2,500 per tonne or more while those in Sabah and Sarawak are subject to 7.5% levy when the CPO price hits RM3,000 per tonne or higher.

Malaysian Palm Oil Council (MPOC) chairman Datuk Lee Yeow Chor speaking in a press conference after the opening ceremony of Malaysia Palm Oil Trade Fair & Seminar (POTS) at the Shangri-La Hotel in Kuala Lumpur yesterday. IZZRAFIQ ALIAS / The Star. October 12, 2016.

Other industry players say that any move to increase the levy threshold will help improve the margins of plantation companies that are crimped because of a drop in production.

Because of the adverse weather conditions arising from El Nino, the production of fresh fruit bunches (FFB) in most plantations has dropped.

“Plantation companies have been pushing for a total abolishment of the windfall tax but it seems that the Government did not want to budge on that part.

“Costs for the plantation industry have gone up with implementation of measures such as the mininum wage.

Production of FFB has come down,” said an industry official.

On the outlook for palm oil price, Lee said that he expected the lingering effects of the “double drought” of El Nino to continue affecting the supply of palm oil.

CPO prices have risen from its year-to-date lows of RM2,188 per tonne in July and the commodity at present hovers at RM2,626 per tonne at press time.

“On the supply side, the Malaysian Palm Oil Board (MPOB) has just published the figures and September production is almost flat compared to August.

“So this is slightly surprising as according to past (seasonal) trends, September usually has a higher production when compared to August,” Lee said.

“Production still seems a little bit curtailed due to the effects of two drought periods from the El Nino which happened in the third quarter of last year and also end-2014.

“There was a prolonged drought period in palm oil producing countries and this also has an effect,” he added.

Lee also said that he did not see any increase in the production of palm oil in the next few months when compared with historical seasonal trends.

Commenting on the demand side, Lee said that there was an increase in purchases from both China and India in the past three months.

“Demand from China has increased a lot in the last quarter partly due to the Mid-Autumn Festival and it is only natural for demand to come down slightly after this big increase.

“Restocking palm oil inventories by China had also helped increase demand earlier.

“Inventories had been at a very low level,” Lee said.

“Usually in the last quarter of the year, palm oil exports would be a bit lower due to the winter months and the assumption that certain countries would consume less.

“On the whole it would be down but compared to last year it will still be steady,” he added.

Meanwhile, Lee said that the MPOC is against any decision by the French government to levy an additional tax on palm oil, terming it as “discriminatory tax”.

According to newswire reports, the France’s National Assembly had scrapped plans for an additional tax on palm oil at end-June.

But MPOC CEO Tan Sri Yusof Basiron said that the intention to do so was still there based on the words used in the conclusion of the last parliament session.

“They did remove the palm oil tax but in the same debate they also said that they will review the taxation on edible oils in the next parliament sitting at the end of this year. The agenda is still there and is not removed totally and somebody will be following up on it,” Yusof said.

“Any decision to do this will affect our trade relationship with France. I believe the intention is still there,” Lee said.

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Business , palm oil , MPOC , profit levy , windfall , IOI Corp


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