Group urges govt to adjust CPO exports to forex
JAKARTA (JP): The government should replace the 40 percent tax on crude palm oil (CPO) exports with a foreign exchange ruling to encourage exporters to sell the commodity on the domestic market, the Federation of Indonesian Vegetable Oils and Fats Association has said.
The federation's vice chairman, Tarmidzi Rangkuti, said yesterday that the export tax on CPO was not an effective way of discouraging producers from exporting their produce.
"Even with a 40 percent tax, selling CPO on the international market is still much more profitable than selling it on the domestic market," Rangkuti told The Jakarta Post.
At the current CPO international price of US$700 per ton or 70 U.S. cents per kilogram, exporters still make a 42 cents profit on every kilogram after the 40 percent tax has been accounted for, Rangkuti said.
With the rupiah trading at Rp 15,000 to U.S. dollar, CPO exporters can earn Rp 5,888 per kg after tax -- a figure much higher than the domestic market price of Rp 3,500 per kg.
He said CPO producers could not be blamed for exporting their products because the huge price differential between the domestic and international market made exporting a very attractive option.
An official from the Joint Marketing Office (KPB), which handles the marketing of state-owned plantation companies' products, said last week that by continuing to focus heavily on the export market, CPO producers were undermining the government program to stabilize cooking oil prices on the domestic market.
The official, who requested anonymity, confirmed that many CPO producers still preferred to export their produce, despite the high tax.
CPO is the main raw material for cooking oil production.
Rangkuti said the 40 percent export tax was not particularly effective in curtailing exports because CPO producers could still "play hide and seek" with customs officials.
"It is possible that CPO producers will attempt to avoid paying the 40 percent tax on all their exports. You know, 40 percent on sales is a lot of money," Rangkuti said.
He suggested that the government abolish the tax and instead oblige all CPO exporters to sell their export revenues to Bank Indonesia (BI), the central bank, at a fixed rate of around Rp 6,000 per U.S. dollar.
"This way, BI would get more dollars to defend the rupiah, and CPO prices on the domestic market would be more stable because the dollar-rupiah exchange rate would no longer fluctuate as sharply as it currently does," he said.
The proposed arrangement, Rangkuti said, would remove the incentive for CPO exporters to export all of their produce because the revenues which they made on the domestic market would then be similar to revenues earned from exports.
If BI fixed the rupiah exchange rate at 6,000 to the dollar, CPO producers would still get Rp 4,200 per kilogram for exported CPO -- about the same as CPO prices on the domestic market -- if the international CPO price stayed at 70 U.S. cents per kg.
"With Rp 4,200 per kilogram, CPO producers would still enjoy a huge profit because the production cost per kilogram of CPO is currently Rp 2,500 at the maximum," Rangkuti said.
Before the crisis hit the country, the production cost for one kilogram of CPO was only Rp 1,500.
Rangkuti, a former BI official, said the requirement to sell export revenues to the central bank was feasible within existing laws.
He argued that based on Law No. 32/1964, all export revenues must be sold to the government through the central bank.
The law, however, was annulled by Government Regulation No. 1/1982 which said that export revenues could be used by exporters according to their own needs.
"How can a law be annulled by a government regulation. I think the government should abolish the regulation and require all exporters to sell their foreign exchange to the government through BI," Rangkuti said.
"I think it is fair to require exporters to sell their dollars to the government because they export Indonesian products, the products of the Indonesian people and soil. The benefits must therefore also be for the people, not for the exporters alone." (rid)