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)