The Malaysian Palm Oil Board (MPOB) said crude palm oil (CPO) stock decreased by 12.75% to 1.15 million tonnes in November from 1.32 million tonnes in October, while processed palm oil stock rose 7.07% to 1.10 million tonnes from 1.03 million tonnes previously.
PETALING JAYA: Planters in Peninsular Malaysia are expected to pay the palm oil windfall profit tax (WPT) by next month.
Industry players said the WPT seemed applicable given that the crude palm oil (CPO) spot prices would likely exceed RM2,500 per tonne this month, while the CPO futures prices have rallied to trade above the RM2,800-per-tonne level.
The last time local planters paid for the WPT was in 2017. Planters have pegged the oil palm industry’s contribution at nearly RM480mil to government coffers by way of the levy during the year under review.
According to the Malaysian Palm Oil Association CEO Datuk Mohamad Nageeb Ahmad Abdul Wahab, there have been ongoing discussions with the government to deliberate on the calculation of the WPT, which has created much confusion among the planters.
Nageeb: Peninsula-based oil palm planters would still need to pay up come January.
There are two sets of calculations – one states that oil palm planters in the peninsula would have to pay 3% per tonne of fresh fruit bunches (FFB) should palm oil prices go beyond RM2,500 per tonne in the cash market.Planters in Sabah and Sarawak, however, only need to pay 1.5% per tonne FFB when the threshold exceeds RM3,000 per tonne CPO.Another version is that for peninsula-based planters, a 15% WPT will be imposed when the CPO price threshold reaches RM2,500 per tonne and above.
For their peers in Sabah and Sarawak, meanwhile, a 7.5% WPT will be imposed when the CPO price hits RM3,000 per tonne and above.
“Despite the confusion and current negotiations with the government, I believe that peninsula-based oil palm planters would still need to pay up come January 2020, ” added Nageeb.
Given the government’s seriousness in its palm biodiesel mandate, the WPT must be collected, whereby about 50% of the collection would be to subsidise the biodiesel programme.
Previously, the government had fully subsidised the biodiesel programme.
“However, with the CPO price now trading between RM2,800 and RM2,900 per tonne, it would be too costly to fully subsidise the programme now, ” added Nageeb.
Meanwhile, industry consultant M. R. Chandran pointed out that “one must bear in mind that the windfall profit levy is a tax levied by governments against certain industries, when economic conditions allow those industries to experience above-average profits.“Windfall taxes are primarily levied on companies in the targeted industry that have benefited the most from the commodity price windfall.
Chandran: The purpose is to redistribute excess profits in one area for the greater social good.
“The purpose is to redistribute excess profits in one area for the greater social good. However, this can also be a contentious ideal.”
Chandran pointed out that regrettably, with respect to Malaysia’s palm oil industry, the windfall profit levy is applied as “a blanket tax” levied on all and sundry irrespective of an individual company’s profit margin.“In my view, the WPT is an archaic, inequitable, complex and inefficient tax system and should be abolished, for the cost structure of plantation operations has changed over the years.”
Therefore, it is timely for the government to review the proposed windfall tax formula, because it assumes that all planters make money when palm oil prices in the physical market surpass RM2,500 per tonne.
“The industry is in need of some breathing space following the dismal palm product prices from July 2018 to October 2019.
“As such, both companies and smallholders have been crushed by low prices with many reporting losses over the past four to five quarters, ” he added.
On the planters’ current cost structure, Chandran said the average all-in cost of production (including overheads and replanting costs) works out to RM1,850 to RM2,000 per tonne CPO, depending on the productivity per unit area or the yield per hectare of CPO plus palm kernel.
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