Government slashes CPO export tax to 10 percent

JAKARTA (JP): The government announced on Friday a cut in export taxes on crude palm oil (CPO) to 10 percent from 30 percent in line with falling international prices.

Minister of Industry and Trade Rahardi Ramelan said the cut was expected to give more incentives for local CPO producers to export their products.

The new tax, however, would be effective only after the minister of finance approves the measure, he said following a meeting with President B.J. Habibie.

Export taxes on refined bleached deodorized (RBD) palm oil and RBD palm olein were lowered to 8 percent from a previous 22 percent.

The government also slashed taxes on exports of crude palm olein to 8 percent from 26 percent, crude palm kernel oil to zero percent from 20 percent and on RBD palm kernel oil also to zero percent from 15 percent.

It also reduced the export tax on prepackaged RBD olein not exceeding five kilograms in volume to zero percent from 17 percent.

It lowered export taxes of crude stearin to zero percent from 15 percent and RBD stearin also to zero percent from 7 percent.

The export taxes on crude coconut oil and RBD coconut oil, remained at zero percent.

Indonesia, the world's second biggest producer of CPO, slapped the levy on CPO and its derivatives after the rupiah nose-dived at the onset of the financial crisis, making exports much more profitable than domestic sales and lead to staggering shortages of cooking oil.

Export tax on CPO was lowered to 30 percent early last month from 40 percent in February and 60 percent in September last year.

The high export tax on the CPO products has been widely criticized specially after the rupiah strengthened to Rp 8,000 level against the U.S. dollar late in May.

Many CPO producers have subsequently stopped their export activities, adding more pressure to the already depressed local market.

According to farmers, they suffered a loss of about Rp 150 per kilogram of fresh fruit bunches sold at current prices.

The goverment has estimated this year's CPO production to reach 6.9 million tons, or 2.8 million tons above domestic demand.

CPO production could reach 7.4 million tons in the year 2000 and 8.6 million tons in 2001, against a projected domestic demand of 4.5 million and 5.1 million tons.

Export tax on CPO products (tabulated under product, new tax, previous tax): Crude palm oil 10% 30%; RBD palm oil 6% 22%; Crude palm olein 8% 26%; RBD palm olein 6% 22%; RBD olein 5kg Pkg 0% 17%; Crude palm stearin 0% 15%; RBD palm stearin 0% 7%; Crude palm kernel oil 0% 20%; RBD palm kernel oil 0% 15%; Crude coconut oil 0% 0%; RBD coconut oil 0% 0%.(prb/hen)