Thu, 18 Aug 1994

Government may impose tax on CPO exports

JAKARTA (JP): The government is mulling over the imposition of a progressive tax on exports of crude palm oil (CPO) to guarantee an adequate supply of the commodity on the domestic market.

Ibrahim Hasan, the chairman of the National Logistics Agency (Bulog), the government-run semi-buffer stock agency, said here this week that the tax is now under consideration, with steps being taken to prepare for possible implementation.

The tax, once imposed, will be implemented progressively, with the rates determined by the export value, he said. He declined to disclose the minimum rate for the planned tax.

Hasan made the statement amid reports about the government's plan to ban CPO exports to curb the possible increase in cooking oil prices at home.

He said the introduction of the progressive tax is one of the alternatives being prepared by Bulog to anticipate possible shortages of CPO supplies in the country.

"Another alternative is to import CPO," he was quoted by the Antara news agency on Tuesday as saying. "But that is not likely to be workable, especially if CPO prices overseas also increase."

If the progressive tax on the CPO exports is implemented, it will be the first progressive scheme imposed on the country's exports.

Bulog, which controls the supplies and prices of scores of foodstuffs, including rice, sugar and cooking oil, could use both schemes, he said.

"Bulog imported around 50,000 tons of olein, a CPO product for the production of cooking oil, in March to curb an increase in cooking oil prices at home," he said.


Nafis Daulay, the chairman of the association of cooking oil producers, said that the introduction of the progressive tax on CPOs export may discourage new investments in CPO production.

The government is currently engaged in an intensive campaign to encourage investors to open palm oil plantations in a bid to increase the country's annual CPO production to around seven million tons by the year 2000 from around four tons at present.

The price of CPO in Indonesia is the lowest in Asia. The low prices have discouraged producers from selling their products at home. The price of cooking oil, for example, is around US$663 per ton, lower than the $680 in Malaysia, the world's largest palm oil producer, and the $720 in Europe.

Daulay said that giving a tax incentive for sales of CPO on the domestic market would be the most appropriate approach to encourage producers to sell their products at home.

The sales of CPO on the domestic market, for example, could be exempted from the 10 percent value added tax (VAT), he said. (hen)