Planters brace for GST

KUALA LUMPUR: Malaysia's oil palm planters are bracing for a 3 per cent increase in production cost as the government impose the Goods and Services Tax (GST) effective April 1 as they are unable to fully pass on down the supply chain.

"By and large, we're putting in our best effort in bracing the GST. It is either zero or standard rated which will involve passing on throughout the supply chain and claimable tax input from the Customs Department," said newly-elected Malaysian Estate Owners Association president Joseph Tek. 

In an interview with Business Times yesterday, he noted there will be a transitional phase in managing these changes at the initial stages. 

He explained that there will be gaps in full and effective implementation of the GST because there are small and mid-sized planters in rural areas with limited connectivity and skilled human resource trained to manage these changes. 

Some transactions which are currently computed on annual basis will now have to be carried out more frequently. There will be blocked input tax transactions from GST refunds of which planters will have no choice but to absorb the cost. 

"Our experts have estimated that there will be marginal increase in cost of production .. around 3 per cent more. It will depend on the planters' resources rendered to the whole process. We implore upon the Customs Department to be our partners in managing changes involving GST," he said.

"Oil palm planters and rubber estate owners, who are our members, are very concerned about unabated cost acceleration in this commodity business. As farmers, we're price takers, we're not price makers," he added.

Last Friday, the third month benchmark palm oil futures on the Bursa Malaysia Derivatives Market fell RM22 to close at RM2,170 per tonne. Palm oil prices have not picked up as forecasted and fundamentals remain weak. 

"Experts have estimated that for every ringgit we earned, oil palm planters are paying almost 40 sen to the federal and state governments in taxes," Tek said. 

This amount covers statutory corporate taxes, cess for both MPOB and MPOC, palm oil stabilisation fund and others. The differences between Peninsular Malaysia, Sabah and Sarawak are the State Sales Taxes (applicable in Sabah and Sarawak) and Windfall Profit Levy at different price thresholds.

"We beseech the relevant authorities to appreciate the burden of ever increasing cost of production that is unfortunately not match with any significant increase in productivity," Tek said. 

This is because, he explained, planters have spent a lot of money on amenities and benefits for employees, cost of guest workers legislation and minimum wages, capitalisation charges and trade stunting certification requirements imposed by developed nations.

Established in 1931, MEOA has survived more than eight decades of social tribulations and economic growth. Today, MEOA effectively represents key oil palm planters who are generating significant economic interests to Malaysia.

Last Friday, the very much respected Datuk Boon Weng Siew, aged 91, retired from leading MEOA, after 25 years of distinguished and selfless service. Long serving vice presidents Mark Chang Tek Mak and Tan Teo Kim have also resigned from their posts.

Tek, who succeeded Boon, noted this change of guard is a watershed for the oil palm and rubber sectors. Under Boon's leadership, MEOA has evolved from a ‘gentlemen’s club’ to an effective group representing the social and economic interests of small to medium-sized estate owners. 

Effective last Friday, Tek's leadership of MEOA is supported by newly-elected vice presidents Jacqueline Foo Sueh Chuan and Gan Tee Jin. 

"The oil palm industry is facing ever-more complex issues. It is only through a process of engagement and united stand that we can safeguard the viability of our industry, which is one of the least imports but biggest value adding contributors to our economy," Tek added.