Indonesia cuts export taxes on CPO and products
Indonesia cuts export taxes on CPO and products
JAKARTA (JP): Minister of Trade and Industry Luhut Pandjaitan
said on Monday that the government had agreed to cut down export
taxes on crude palm oil (CPO) to five percent and on its products
to two percent.
Luhut said that the new tax policy would be effective starting
on Tuesday (today).
"The export tax on CPO will be reduced to five percent, while
the tax on its derivatives including olein will be lowered to two
percent," he told reporters before attending a meeting with other
economic ministers.
Luhut said that the decision was made during an earlier
meeting he had with Finance Minister Prijadi Praptosuhardjo.
The government has been under pressure from local CPO
companies to cut down the export taxes on CPO and its products to
reduce a glut in domestic supply and to make local CPO products
more competitive against products from Malaysia, the world's
largest CPO producer.
Indonesia, the second largest CPO producer, earlier imposed a
10 percent export tax on CPO, eight percent export tax on crude
palm olein, six percent on refined bleached deodorized (RBD) palm
oil and six percent on RBD palm olein.
The government banned exports of CPO in 1998 during the
heightened political and economic crisis in a bid to ensure an
adequate domestic supply of CPO, a raw material for cooking oil,
which is a basic necessity in a country of some 200 million who
love fried foods.
A boom in CPO exports in 1998, before the trade ban was
introduced, had caused a scarcity of cooking oil in the domestic
market which helped trigger social unrest in several parts of the
country.
The government then replaced the export ban with taxes. Under
an agreement with the International Monetary Fund, the export
taxes were gradually cut down from 60 percent in 1998 to 10
percent by the end of last year.
The IMF is providing a multibillion dollar bailout loan to
help finance the three-year economic program of the current
administration.
Meanwhile, a source at the finance ministry said that the
government was actually reluctant to lower the export taxes on
CPO and its derivatives because the domestic cooking oil demand
would soar in December amid year-end festivities.
The source said that the government feared cooking oil could
become scarce if the export taxes were lowered.
The source added that the cut in the export taxes would lower
the government's revenue.
The announcement of the reduction in the export taxes of CPO
and its products was made amid plans by Malaysia to increase palm
oil exports by around one million tons over the next six months
in order to cut its stock pile and boost prices which were now at
a 13-year low.
Primary industries minister Lim Ken Yaik said on Sunday that
Malaysian CPO would be exported to India and Europe and credits
worth US$135 million would be provided to buyers and counter-
trade arrangements would be established with China.
"The finance minister has agreed to an initial export of
500,000 tons of crude palm oil to India and Europe in six months'
time," he was quoted as saying by Bernama news agency.
The federal government agency Felda and six companies had been
authorized to export the crude free of the normal tax.
Credit worth US$50 million would be given to Russia, $30
million to Egypt, $25 million to Bangladesh, $20 million to
Myanmar and $10 million to North Korea.
The total credit of $135 million would pay for about 350,000
tons of palm oil.
Some 200,000 tons of palm oil would be exported to China in
exchange for 33 diesel locomotives.(rei)