MEOA appeals for a review of ‘unfair’ taxes on palm oil sector

KUALA LUMPUR: The Malaysia Estate Owners’ Association (MEOA) is appealing for various taxes on the oil palm industry to be suspended or abolished, calling them “unfair”.

The taxes it is referring to are the windfall profit levy (WPL) on crude palm oil (CPO), 7.5 per cent sales taxes in Sabah on sales of CPO, and five per cent sales taxes in Sarawak on sales of CPO as well as crude palm kernel oil (CPKO).

In a statement today, MEOA described the palm oil sector as the most heavily taxed in the country other than the “sin sectors” of gaming, tobacco and alcohol.

“Collectively, they (the taxes on the oil palm industry) amounted to an estimated RM1.3 billion in 2019 when CPO prices were low, averaging RM2,079 per tonne.

“Based on year 2019 production numbers and assuming CPO price sustains at RM3,200 per tonne, MEOA expects these taxes could balloon to RM2.8 billion a year,” it said.

Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz, in an interview with Bernama last week, said the imposition of a windfall tax on glove manufacturers would make investors think twice before investing in the country.

Referring to his remark, MEOA said: “We therefore ask whether the finance minister will expand this policy thinking to also exempt the palm oil industry from this tax.

“It should be pointed out that no oil palm planter will be rejoicing endlessly with today’s palm oil prices, given the cumulative effect of relentless cost increases over the years.”

Yesterday, the Malaysian Palm Oil Board (MPOB) chairperson Datuk Ahmad Jazlan Yaakub said that WPL collections could be about RM500 million in 2021 if the price of CPO was between RM3,000 and RM3,500 per tonne.

“In other words, WPL collections from the palm oil sector next year could exceed the RM400 million that several glove manufacturers donated to the government’s Covid-19 Fund,” it said.

Meanwhile, MEOA urged the Sarawak state government to review the sales taxes on CPO and CPKO with the aim of reducing or abolishing them.

“These taxes, on revenue rather than profits, are a heavy burden on the sustainability of oil palm operations, especially when CPO prices are low, and on Sarawak planters, many of whom were late starters vis-à-vis Peninsular Malaysia or Sabah planters in oil palm cultivation,” it said.

As for Sabah, the association requested the state government to consider the possibility of lowering or scrapping the 7.5 per cent CPO sales tax, which amounted to an estimated RM791 million, last year.

As the tax was on revenue rather than profits, MEOA calculated that this amounted to an outsize 44 per cent of economic profits in 2019 when CPO prices were low.

MEOA said over the years, the oil palm sector had transformed Malaysia into a driving force in the global edible oil market while nurturing the national economy and remaining an indispensable economic pillar in the social-political landscape, especially in bringing development and creating well-being in the rural areas.

“The industry has remained steadfast, providing and sustaining employment opportunities, creating many multiplying and spin-off benefits, and generating significant foreign exchange for the country.

“All these aspects must be sustained to enable a win-win proposition for all relevant stakeholders,” it added. -Bernama