12th July, 2012
KUALA LUMPUR: The Malaysian Palm Oil Council (MPOC) has expressed concern that Indonesia’s duty structure for palm oil could lead to a price undercutting race which would not benefit the industry in both Malaysia and Indonesia.
Indonesia imposes a 19.5 per cent export tax for crude palm oil (CPO) in order to encourage downstream activities in the country while Malaysia imposes 30 per cent after a duty-free limit of 3.6 million tonnes, putting it in a disadvantaged position.
“Indonesia’s palm oil tax structure is destroying value because it allows their operators to undercut prices,” MPOC Chief Executive Officer Tan Sri Dr Yusof Basiron said.
The new export tax structure gives Indonesian refiners a price advantage, Yusof said, adding Malaysian refiners cannot offer the same discount since they do not enjoy the same tax benefits as the Indonesian players.
“Obviously, we have to discount our selling price as well in order to sustain our market share. But, by doing this regularly we are destroying value,” he told Bernama on the sidelines of the Academy of Sciences Malaysia International Conference 2012 here yesterday.
He said Malaysia and Indonesia would not benefit when the commodity is in short supply because of the price undercutting.
Asked on the best solution, Yusof said: “Don’t have a tax regime that allows operators and industry members to undercut.
“If you have it we can’t do anything, but we also have to respond by reducing the price as well.”
Yusof said without Indonesia’s new tax regime, both Malaysia and Indonesia could take advantage of the supply shortage and maximise earnings.
“At the same time, we could also allow the price to rise naturally according to supply and demand,” he said.