Malaysia may impose tax on palm oil to counter budget steps
Malaysia may impose tax on palm oil to counter budget steps
KUALA LUMPUR (Reuters): Malaysia is likely to impose taxes on
palm oil, its leading export earner, in its budget this week to
help offset an expansionary spending plan, analysts and traders
said.
They expect Prime Minister Mahathir Mohamad, who is also first
finance minister, to announce an export tax on refined palm oil
or a sales tax on crude palm oil when he unveils the 1999 budget
to parliament at 4 p.m. on Friday.
"I think there would be some form of tax on palm oil," said
Quah Poh Keat, a senior tax partner at KPMG.
"We have to look at two directions. Firstly, palm oil
producers have been making very good profits. Also, the
government needs a lot of funds at this point and the palm oil
sector is one likely area they will look into."
Analysts said the government may re-impose an export tax on
refined palm oil lifted a few years ago to boost exports when
local prices were low.
"The situation is different now. Prices are currently very
high, so there's a possibility it may be re-imposed," said a
trader in Kuala Lumpur.
Palm oil has become a convenient target now that the
government, which had run budget surpluses for five consecutive
years before 1998, is in the red.
Malaysia's crude palm oil prices are trading around 2,300
ringgit (US$605) a ton compared with 1,200 ringgit before the
start of the Asian financial crisis, mainly because of a sharp
depreciation in the ringgit currency which made local palm oil
competitive in the export market.
Greg Feldberg, a plantation sector analyst at ABN-AMRO Asia
Equity Research (Malaysia), said he expected the government to
impose a 5 percent export tax on refined palm oil.
But some analysts said a sales tax on crude palm oil would be
more likely.
"Duties may come in the form of tax on crude palm oil but not
on refined products," said Nakul Rastogi, international trading
manager at Pacific Inter-Link Sdn. Bhd.
Malaysia's palm oil export earnings for the first eight months
of this year totaled 11.5 billion ringgit, up 74.4 percent over
the same period in 1997.
Malaysia exported 7.4 million tons of palm oil last year, of
its production of nine million tons.
Analysts said that at current prices, crude palm oil producers
still stood to make hefty profits even after paying taxes.
Traders said reduced competition from Indonesia, the world's
second largest producer and exporter of palm oil after Malaysia,
would give the government more reason to impose taxes.
Indonesian palm oil exports have slowed after the government
imposed export taxes of 60 percent on crude palm oil, 55 percent
on RBD palm oil and palm olein and 50 percent on crude palm
kernel oil.