CPO export tax will continue to encourage smuggling: Kadin

JAKARTA (JP): The government's move to cut the export tax on crude palm oil (CPO) from 60 percent to 40 percent will not help farmers and plantations firms, but will continue to encourage smugglers, the Indonesian Chamber of Commerce and Industry (Kadin) said on Tuesday.

Kadin's chairman of the forestry and plantation department, Adi Warsita Adinegoro, said the imposition of the CPO export tax had not proven effective in securing adequate supplies of CPO for domestic cooking oil producers.

Instead it had encouraged profiteers to smuggle the commodity to foreign markets.

"The government must rethink its policy because the 40 percent export tax is still too high for farmers," he said.

"Please do not repeat past mistakes because traders will always find loopholes," he added.

Adi said olein processors began complaining early last year that the rampant export smuggling of the commodity was the main reason behind the shortage of CPO in the country.

The government levied taxes on the export of CPO, which is used to produce cooking oil, in an attempt to force producers to sell the commodity on the local market in order to lower domestic cooking oil prices.

Exporting has become a very attractive option for producers since the rupiah dropped sharply in value against the U.S. dollar.

The rupiah currently trades between Rp 8,000 and Rp 9,000 against the greenback, compared to its precrisis level of Rp 2,450 in July.

Earlier this month the export taxes were lowered to 40 percent from 60 percent in an attempt to boost exports and farmers' incomes.

Adi admitted that the lower export taxes had raised the price of oil palm kernel to around Rp 300 per kilogram from Rp 200 per kg.

"But the current prices are still far below the pre-export tax level of Rp 700 per kilogram," he said.

He said that the government must ease restrictions on the export of CPO products in order to prevent the country's oil palm farmers and plantation companies from collapsing.

"The reasonable level of export taxes on CPO is between 5 percent and 15 percent. This is the level which will help farmers cope with the soaring price of fertilizer and will enable them to cultivate oil palm plantations," he said. (gis)