Since 2015, the Indonesian Oil Palm Estate Fund (BPDPKS), which is tasked with strengthening and promoting sustainable practices in the industry, has been imposing a $50 per ton export levy on crude palm oil and $30 per ton levy on crude palm oil derivative products when prices drop below $750. (Antara Photo/M. Rusman)

Indonesia Plans to Trim CPO Export Tax Rates to Offset Burden of Levies

BY :GAYATRI SUROYO, ADRIANA NINA KUSUMA & ANURADHA RAGHU

APRIL 27, 2015

Jakarta/Kuala Lumpur. Indonesia, the world’s top palm grower, plans to reduce its crude palm oil (CPO) export tax to help offset the cost to companies of a plan to impose separate export levies, a senior Finance Ministry official said on Monday.

Earlier this month, the government said it would issue a regulation requiring exporters to pay $50 on every tonne of CPO and $30 for processed palm oil product exported to fund new biodiesel subsidies. The regulation hinges on President Joko Widodo’s signature to become law.

The government now intends to cut the export tax rate, which currently begins at 7.5 percent and can go to a maximum of 22.5 percent, depending on a monthly calculation of palm oil prices.

“The current tariff will be adjusted so that the sum that companies pay wouldn’t be too big,” Suahasil Nazara, the acting head of fiscal policy office at the finance ministry, told local media in Jakarta. The price threshold for the tax would remain unchanged at $750 a tonne.

No date was given for the reduction in the rate.

“It will stay like this for awhile, and our focus is forming the agency to manage CPO fund first,” Finance Minister Bambang Brodjonegoro told Reuters.

The government has kept the palm oil export tax at zero since October, based on the average price from several global commodity markets. CPO shipments for May will remain duty free, its trade ministry said on Monday.

No further details on which companies would be most affected by the palm oil levy or the reasoning behind the plan was given.

However, it would be helpful to plantation firms and overall make Indonesia more competitive against rival exporter Malaysia, while helping draw in more demand from major palm customers China and India.

Neighbouring Malaysia, the world’s No. 2 producer, also manages its export tax regime for the crude grade with a monthly tax structure, in which a 4.5 percent levy kicks in once average free-on-board prices cross a threshold of 2,250 ringgit.

The benchmark July contract on the Bursa Malaysia Derivatives exchange closed near a two-week low of 2,109 ringgit ($592) a tonne on Monday, with prices heading for their second straight monthly decline.

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Indonesia CPO