Cocoa producers urge govt to drop VAT

Cocoa producers urge govt to drop VAT

The Jakarta Post, Jakarta

The government target to increase the export value of the
country's cocoa and cocoa products by 25 percent this year can
only be achieved if the existing value-added tax (VAT) on the
commodity is scrapped, says an industry leader.

Zulhefy Sikumbang, chairman of the Indonesian Cocoa
Association (Askindo) said on Thursday the current 10 percent VAT
imposed on cocoa farmers when selling their output to the local
processing industry had prompted the farmers to export the
commodity in the form of unprocessed beans.

He said that this in turn had caused a shortage of raw
materials for the processing industry, forcing some of them out
of business.

The Indonesian Cocoa Industry Association (Apikci) said from
12 factories listed in the association, only three were still
operating.

"The value of cocoa will be higher in the international market
if it is processed first," Zulhefy told The Jakarta Post.

He predicted that with the tax incentive, the local cocoa
industry could enjoy an export revenue of between US$900 million
to $1.2 billion per year.

The government revealed on Wednesday it has selected 15
priority export products to achieve this year's non-oil and gas
export growth target of 7 percent.

Cocoa is among the priority products. The government set cocoa
and cocoa products exports to increase by 25 percent from US$629
million in 2003 to $789 million for this year.

To help achieve the target, the government is planning to
scrap the VAT imposed on certain raw materials like cocoa.

But Zulhefy feared that the plan might not be realized in the
future when a new government is formed.

"New government means new policy, so it might not
materialize," he said.

He also said that processing cocoa beans prior to export was
necessary because Indonesia's cocoa beans were of low quality.
Some 90 percent of Indonesia's cocoa production is low quality
unfermented beans.

Indonesia is the third largest cocoa exporter after the Ivory
Coast and Ghana with total cocoa plantation area of 776,900
hectares. Indonesia's cocoa accounts to around 11 percent of
global demand which stand at 3 million tons per annum.

Last year, Indonesia's cocoa output reached 433,411 tons.
Around 80 percent of cocoa export goes to Southeast Asian
countries.

Previously, Askindo said cocoa production could decline by 7.7
percent this year due to the expected drought in the second
quarter of the year.