Govt may cut CPO export tax to 40% in January

JAKARTA (JP): The government will slash the export tax on crude palm oil (CPO) from 60 percent to no lower than 40 percent by the end of January, Industry and Trade Minister Rahardi Ramelan said on Thursday.

Rahardi said his ministry had determined the new export taxes for CPO and its byproducts and would soon recommend that the Finance Ministry initiate the tax cut after the Muslim Idul Fitri holiday, which will fall on Jan. 19 and 20.

"It will be between 40 and 60 percent, but it can't be lower than 40 percent," he told a press briefing, declining to cite a specific figure.

Meanwhile, Forestry and Plantations Minister Muslimin Nasution said on Thursday the high export taxes on CPO and its byproducts had halved the incomes of oil palm farmers as demands for the oil palm kernels had sharply dropped.

The price of oil palm kernels fell from Rp 700 to Rp 350 a kilogram after the government raised the export tax from 40 percent to 60 percent in July, last year.

The high export tax had discouraged CPO producers from exporting and caused the total supply of the commodity to flood the local market, especially after the rise in the rupiah's value to between Rp 7,500 and Rp 10,000 to the greenback in September.

"I have requested the Industry and Trade Minister to lower the export taxes after Idul Fitri," he said.

Besides the 60 percent tax on CPO, crude palm olein and oil palm kernel, the government imposes a 55 percent tax on refined bleached deodorized (RBD) olein and RBD palm oil, with 25 percent on crude stearin, and 20 percent on RBD stearin.

It also imposes a 50 percent tax on crude palm kernel oil, 45 percent on RBD palm kernel oil, 20 percent on crude coconut oil and 15 percent on RBD coconut oil.

In Thursday's yearend press briefing, Rahardi said the government would also next month announce its new automotive policy.

He said that the current policy in which the fiscal incentives are based on the proportion of local components used in car production would be changed to meet the requirements of the World Trade Organization's free trade pact.

The government would not likely maintain fiscal incentives through lower import duties and luxury taxes beginning next July, when the World Trade Organization's sanctions on Indonesia's car industry take effect, he said.

"Incentives will probably be in the form of design and technological assistance, and no longer through fiscal measures," he said.

Earlier this month, the WTO decided that Indonesia must abolish the country's existing policy on the automotive sector, which offers lower import tariffs for producers of cars with a high local components content.

The measure must be abolished by July 23, 1999, a year earlier than the planned 2000, due to the prior move by the government to give PT Timor Putra Nasional, a carmaker belonging to a son of former president Soeharto, preferential treatment in developing the so-called "national car project". (das/gis)