Gapki wants government to drop export tax on CPO

JAKARTA (JP): Palm oil producers have called on the government to erase the 10 percent export tax on the commodity, saying that a slowdown in sales has led to a massive stock buildup.

The Indonesian Palm Oil Producers Association (Gapki) had written to the Ministry of Finance to renew their demand, which was rejected on Feb. 2, Antara reported on Thursday.

Gapki president Derom Bangun said abolishing the tax would greatly boost exports in a competitive global market, and noted that other palm oil producing countries had also accumulated stock.

Unless the government erases the tax, Indonesia will unlikely meet its targeted export of three million tons this year, he said.

Indonesia's reputation as a crude palm oil (CPO) exporter was damaged by the discovery in October of contaminated shipments in Rotterdam, the Netherlands, which were traced to Medan producers.

Exports have since declined, leading to a huge stock buildup in several production centers.

About 85,000 tons of Indonesian palm oil shipped to Rotterdam in September and October were contaminated with diesel oil. Some of the tainted cargoes have since been returned.

Derom warned that the current oversupply could make domestic prices of CPO and fresh fruit plummet, further undermining the national palm oil industry.

The government, which uses the export tax to secure enough cooking oil for home, has gradually lowered the rate from 60 percent in early 1998, to 10 percent beginning in July.

Rumors that the government was about to abolish the tax because of massive stockpiles and more stable domestic cooking oil prices were dismissed by the Ministry of Finance on Feb. 2.

Minister of Trade and Industry Yusuf Kalla said on Thursday that it had proposed cutting the export tax on CPO to 3 percent from the current 10 percent level in order to boost exports.

Kalla said he was waiting for a decision on the proposed tax cut from finance minister Bambang Sudibyo.

Indonesian exporters have repeatedly called on the government to reduce the export tax in order to help kick start CPO exports, which have tumbled since the contamination scandal broke last year.

Indonesia expected to export at least 2 million tons of CPO in 1999, but the scandal led to a significant drop in exports, exporters said.(10)