Govt to raise export taxes on CPO to between 50% and 60%

JAKARTA (JP): The government will raise the export taxes on crude palm oil (CPO) and its by-products to between 50 percent and 60 percent from next week to prevent a further increase in cooking oil prices, a senior trade official said here yesterday.

Director General of Domestic Trade Ilchaidi Elias said the increase in the export tax, which is currently set at 40 percent, was important to help slow down an export boom which has caused cooking oil shortages on the local market.

"Details of the new export tax on CPO and its by products will be announced on Tuesday," Ilchaidi said following a meeting with state CPO producers.

Ilchaidi said most CPO producers exported their products despite the 40 percent export tax because high international prices still gave them a bigger profit margin than could be obtained through sale on the domestic market.

Unlike the present export tax, the new one will be set with respect to international prices. At present the export tax is based on the freight on board (FOB) price of CPO products, adding that CPO was currently trading on the international market at US$630 per ton while the FOB price was $592 per ton.

"The new export tax will remove the incentive for CPO producers to export their produce because the revenue available from local and international sale will be much the same," he added.

Sources at the ministry said the tax on exports of crude olein would be set at between 50 percent and 60 percent, up from 40 percent. Taxes on refined, bleached and deodorized (RBD) palm oil and RBD olein will be set at between 45 percent and 55 percent, up from 35 percent, while taxes on crude palm kernel oil will be set between 40 percent and 50 percent, up from 35 percent. The tax on RBD palm kernel oil will be increased from 30 percent to between 35 percent and 45 percent.

Ilchaidi also said the new export taxes would apply to a total of 12 CPO products and by-products. Currently taxes are levies on only nine products and by-products.

Cooking oil was selling at around Rp 6,300 per kilogram in Jakarta yesterday, well above the government's floor price of Rp 4,000 per kg.

The government imposed a ban on the export of CPO and its derivatives late last year in a failed attempt to stabilize cooking oil prices.

The government then removed the ban on April 22 and replaced it with the export taxes. However, high international prices and the poor distribution network for the commodity caused further price increases.

Last month, the government cut the distribution chain for cooking oil and made the Joint Marketing Office for Farm Products (KPB) and the state distribution company PT Dharma Niaga responsible for ensuring a steady supply of the essential commodity reach markets around the country. However, prices have continued to be volatile.

Ilchaidi said that from yesterday, all CPO produced by state plantation companies would be sold on the domestic market to prevent further price increases before the new export taxes take effect.

Indonesia's CPO production this year is expected to reach 5.9 million tons. Thirty percent or 1.8 million tons are produced by state plantation companies. Domestic consumption of CPO is a staggering 3.2 million tons per year.

First Chairman of the Indonesian Palm Oil Producers Association (GAPKI) Derom Bangun said yesterday that he regretted the planned tax increases and said they would be very costly to the palm oil industry.

According to Derom, the current 40 percent export tax on CPO should provide the government with enough funds to purchase a buffer stock to stabilize cooking oil prices in Jakarta and other big towns.

He also noted that the current increase in cooking oil prices had resulted mainly from disruption of the distribution system caused by the recent riots, and not through a shortage in supply. (gis/jsk)