MARKET DEVELOPMENT
Mixed Reactions on New Palm Oil Tax Rule
Mixed Reactions on New Palm Oil Tax Rule
21/07/2014 (Jakarta Post) - Palm oil stakeholders have voiced mixed reactions over a new regulation that now allows palm oil firms to claim some production costs from sales tax.
The newly passed finance ministerial regulation, which replaces the previous arrangement, stipulates that producers can directly be reimbursed for value-added tax incurred in purchases of goods related to production, such as fertilizers and tools, known as “input tax”, from the sales tax, or “output tax”.
Hence, they are required to only pay the remaining sales tax after the input-tax reduction.
In the case of exports, the output tax is zero percent, thereby exporters can claim back the input tax from the government.
Indonesian Palm Oil Board (DMSI) chairman Derom Bangun welcomed the new rule, saying that it would apply to all oil palm plantation operators, both owners of oil palm plantations who have their own facilities to process fresh fruit bunches to crude palm oil (CPO) and those who relied on other firms’ facilities.
Consequently, this would result in fair competition between entire business stakeholders.
“It will create a level playing field for all players in the palm oil business,” Derom said Sunday.
Pertaining to the regulation’s impact on growers, Derom said farmers with a turnover of more than Rp 4.8 billion (US$413,258) each year could register as a tax subject to access the facility.
At present, farmers are not considered a subject to tax, thereby they cannot benefit from the new rule.
Palm oil firms, particularly those with integrated plantations and processing facilities, have often faced difficulties tracing in detail the elements necessary to calculate the input tax, resulting in tax disputes.
The difficulties partly stem from the status of fresh fruit bunches, of which input tax cannot be credited.
In contrast with DMSI’s view, the Indonesian Oil Palm Smallholders Association (Apkasindo) said the new rule was unfair because it excluded firms that ran oil palm plantations but did not process their fresh fruit bunches, as well as processors who did not own their own plantations.
“These business players cannot access the tax facility, so it is discriminative. The government should not pass such a rule,” said Apkasindo secretary-general Asmar Arsjad.
Asmar further said the government should instead accommodate the interests of all palm oil industry players, as they all spent similar costs on production.
Responding to this issue, Deputy Trade Minister Bayu Krisnamurthi said trade officials were in intensive talks with their counterparts in charge of taxing, industry and agriculture.
The ministry, he said, wanted to ensure that the new regulation placed no additional burden on small growers.
“Our concern is whether the price of fresh products at the retail level or the competitiveness of the exported products are affected when the rule is passed on to farmers,” he said over the weekend.
The newly passed finance ministerial regulation, which replaces the previous arrangement, stipulates that producers can directly be reimbursed for value-added tax incurred in purchases of goods related to production, such as fertilizers and tools, known as “input tax”, from the sales tax, or “output tax”.
Hence, they are required to only pay the remaining sales tax after the input-tax reduction.
In the case of exports, the output tax is zero percent, thereby exporters can claim back the input tax from the government.
Indonesian Palm Oil Board (DMSI) chairman Derom Bangun welcomed the new rule, saying that it would apply to all oil palm plantation operators, both owners of oil palm plantations who have their own facilities to process fresh fruit bunches to crude palm oil (CPO) and those who relied on other firms’ facilities.
Consequently, this would result in fair competition between entire business stakeholders.
“It will create a level playing field for all players in the palm oil business,” Derom said Sunday.
Pertaining to the regulation’s impact on growers, Derom said farmers with a turnover of more than Rp 4.8 billion (US$413,258) each year could register as a tax subject to access the facility.
At present, farmers are not considered a subject to tax, thereby they cannot benefit from the new rule.
Palm oil firms, particularly those with integrated plantations and processing facilities, have often faced difficulties tracing in detail the elements necessary to calculate the input tax, resulting in tax disputes.
The difficulties partly stem from the status of fresh fruit bunches, of which input tax cannot be credited.
In contrast with DMSI’s view, the Indonesian Oil Palm Smallholders Association (Apkasindo) said the new rule was unfair because it excluded firms that ran oil palm plantations but did not process their fresh fruit bunches, as well as processors who did not own their own plantations.
“These business players cannot access the tax facility, so it is discriminative. The government should not pass such a rule,” said Apkasindo secretary-general Asmar Arsjad.
Asmar further said the government should instead accommodate the interests of all palm oil industry players, as they all spent similar costs on production.
Responding to this issue, Deputy Trade Minister Bayu Krisnamurthi said trade officials were in intensive talks with their counterparts in charge of taxing, industry and agriculture.
The ministry, he said, wanted to ensure that the new regulation placed no additional burden on small growers.
“Our concern is whether the price of fresh products at the retail level or the competitiveness of the exported products are affected when the rule is passed on to farmers,” he said over the weekend.