Govt to lower CPO export tax to 40%

Govt to lower CPO export tax to 40%

JAKARTA (JP): Minister of Industry and Trade Rahardi Ramelan
reaffirmed on Friday his earlier promise that the export tax on
crude palm oil (CPO) would be cut from the current 60 percent to
as low as 40 percent.

Rahardi told reporters after Friday prayers that the Ministry
of Finance had decided on the reduction of export taxes on CPO
and its derivatives and would announce its decision next week.

"I can't disclose the amount of the tax cut for CPO right now,
but the export tax will be between 40 and 60 percent," he was
quoted by Antara as saying.

Export taxes on CPO and its by-products were raised to as high
as 60 percent in July in an effort to curb the outflow of the
commodities which was causing domestic cooking oil prices to rise
sharply.

However, the high export tax did not result in lower prices
for cooking oil, forcing the government to control the
distribution of the commodity through the State Logistics Agency
(Bulog).

The distribution of cooking oil was later transferred from
Bulog to the Indonesian Distribution Cooperatives, which receives
supplies of palm olein from state plantation companies and sells
the product at reduced prices in the markets.

The high export tax has also resulted in the rampant smuggling
of CPO out of Indonesia, an earlier complaint of CPO producers,
who also said that the tax caused a local glut of CPO.

CPO is priced at around Rp 2,700 per kilogram locally,
compared to the international price of Rp 5,400 per kilo at the
current exchange rate of Rp 8,600 to the U.S. dollar.

The chairman of the Federation of Palm Oil Producers, Derom
Bangun, hailed the plan to slash the export tax, saying that it
was not likely to trigger a rise in the price of cooking oil.

The export tax was just one of two measures being employed by
the government to control the domestic price of cooking oil,
Derom said on Friday

The other measure is the basic export price of palm oil
commodities set by the government to determine the export tax, he
said.

The government sets the basic export price of CPO at US$535
per metric ton compared to the international market price of $630
per ton.

"The current export tax is 60 percent, but with the basic
export price reaching 84 percent of the market price exporters
pay an effective 50 percent tax," he told The Jakarta Post.

"The government could lower the tax to 40 percent, for
example, but it could bring the basic price of CPO to an
effective level to maintain the domestic cooking oil price," he
said.

He said the government might also stop short of sharply
lowering the export tax of olein next week to prevent the price
of cooking oil from surging after the CPO tax is slashed.

At the very least, the tax cut could boost the depressed
prices of oil palm kernel sold by farmers, he said.

Although the price of cooking oil has risen, especially during
the month of Ramadhan, an oversupply of oil palm kernel and CPO
has caused the prices of these commodities to sink, he said.
(das)