Palm oil windfall tax to stay, for now

THE government said the windfall profit tax on oil palm planters stays, dismissing calls for a review of the calculation of the levy."The Cabinet has decided that the windfall tax on palm oil be maintained for now," said Plantation Industries and Commodities Minister Tan Sri Bernard Dompok.

Oil palm planters via millers in Peninsular Malaysia are at the verge of having to pay a windfall tax via millers starting January 1 this year when palm oil futures traded above RM2,500 per tonne. The Malaysian Estate Owners Association (MEOA), which represents small-and medium-sized estates of more than 40ha, appealed to the government to review the current windfall tax formula. This is because the calculation of windfall tax assumes all planters make money when palm oil prices in the physical market surpass RM2,500 per tonne.

MEOA president Boon Weng Siew reportedly said it would be more justified if the windfall tax is on actual profits of audited financial accounts, like corporate tax. "This is because not every planter makes tonnes of money as the profitability of oil palm plantations depends on the age and productivity of the trees. A newly-replanted estate would still be losing money even if palm oil prices surpass RM3,000 per tonne."

Oil palm planters in the peninsular have to pay the windfall tax when palm oil prices go beyond RM2,500 per tonne in the cash market. Planters in Sabah and Sarawak, however, only need to pay the windfall tax if the price crosses RM3,000 per tonne.

In the last three weeks, palm oil prices fell as the US dollar strengthened against ringgit. Yesterday, the third month benchmark crude palm oil price slid a further RM62 to close at RM2,407 per tonne on the Bursa Malaysia Derivatives Market.

Asked if he is comfortable with the current palm oil pricing trading above RM2,000 per tonne, Dompok said, "At RM2,400, RM2,500 and RM2,600 per tonne, there's still a margin. Farmers and plantation owners should be happy. When they're happy, I'm happy."

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