The imposition of 8.0% of export tax on crude palm oil (CPO) from 1/1/2021 in response to the recent increase in CPO price shows that the PN Government does not understand the oil palm industry or is not bothered about the welfare of those in this industry. Small holders and those in the oil palm industry are hardly making money in January 2021 and the next 2 months because we are in the midst of low production of Fresh Fruit Bunches (FFB) season of oil palm even though the price is high.
The production in January of each year is less than half of that during the peak period in the months July, August and September (varies slightly from place to place) of each year. With production as low as 0.3 per MT per acre, many small holders are not getting much net income even though the price of CPO is about RM3,800 per MT.
Palm oil is the most taxed agriculture product in the country. The government imposes MPOB cess, windfall tax, export duty and sales tax (in Sabah and Sarawak) apart from the usual corporate or personal income tax. The cost of production of one (1) MT of CPO is about RM2,000 (depending on the efficiency and the productivity of each small holder or estate). The cost of production increases significantly if we add in the various cess, levy or taxes imposed on the CPO.
Illustration of the total cost of production of 1 MT of CPO in Sabah.
| (i) | Cost to produce 1 MT of CPO though FFB production | RM2,000.00 |
| (ii) | MPOB Cess | RM 14.00 |
| (iii) | Windfall tax at 1.5% of CPO Price | RM 57.00 |
| (iv) | Sales Tax at 7% of CPO Price | RM 266.00 |
| (v) | Export Tax at 8% of CPO Price | RM 304.00 |
| RM2,641.00 |
At RM3,800 per MT (considered highest price in a decade), a company / a small holder can make a net income of only RM1,159.00. The Government will tax the company a further 24% corporate tax on this RM1,159.00 equivalent to RM238.16 leaving a net income of RM920.84 which is the income from about 3 acres of land currently or 1.5 acres during peak period. Even with such high CPO price, the income is not great. The direct taxes of items (ii), (iii), (iv) and (v) above amounts to RM641.00 per MT which if translated to corporate tax is 35.61% (641/1,800 X 100%).
Therefore, to tax a company equivalent to 59.61% corporate tax is unfair and undermining the industry, pushing our local players to migrate to other countries.
CPO price is not expected to stay at RM3,800 per MT. It is forecasted that the CPO price will average at only RM2,400 per MT for 2021. In such an event, if the various taxes are continued to be imposed, there will hardly be any profit for those involved in this industry. If the government continues to over tax this industry, it will kill it in the process, affecting the lives of millions who depend on this industry for a livelihood.
I once again call on the government to only impose personal income tax or corporate tax (like in all other businesses) on those in the palm oil industry and abolish all forms taxes that are imposed exclusively on the palm oil industry.