19/07/2016 (Borneo Post) - The tax structure in Malaysia is one of the factors hindering the oil palm industry’s competitiveness, especially when compared to Indonesia.

According to IJM Plantations Bhd (IJM Plantations) chief executive officer and managing director Joseph Tek Choon Yee, Malaysia producers are more competitive against the Indonesian producers when crude palm oil (CPO) prices are below RM2,300 per tonne but beyond that, will become less compeitive and more so for Sabah and Sarawak when it is at RM2,300.

“In Indonesia today, for every tonne of CPO produced, the grower will need to pay a tax of RM200, which is equivalent to US$50.

“Beyond a certain price, say RM2,800, with just a threshold of RM750, this is when you increase (tax) to RM215, all the way to RM400,” he said in his ‘Synopsis of the Factors Impacting the Competitiveness of the Malaysian Oil Palm Industry’ presentation at the 12 ISP National Seminar 2016 (NATSEM 2016).

Looking at Peninsular Malaysia, Tek explained that the difference in comparison with Sabah and Sarawak is the sales tax, whereby the sales tax in Sabah and Sarawak is of a different percentage. In addition, planters pay cess of RM13 per tonne of CPO to the Malaysia Palm Oil Board.

Taking all the calculations in mind, Peninsular Malaysia, on a taxation comparison, will lose out in terms of competitiveness against Indonesia when producers reach a price of RM2,800.

Looking at East Malaysia, Tek explained that windfall for Sabah and Sarawak will not kick in until they are at RM3,000. At RM2,300 at Sabah, tax amounts to RM289 whch is already higher than Indonesia.

“It’s the same for Sarawak, although at a lower taxation from a sales tax of RM232, it’s still higher than Indonesia,” he said.

In summary, Malaysian producers are more competitive than Indonesian producers when crude palm oil (CPO) prices are below RM2,300 per tonne after paying for the relevant taxes that are based on average selling price (ASP). This is because of the prevailing Indonesian export levy.

However, he pointed out that Malaysian producers will be less competitive against Indonesian producers when CPO prices are above RM2,300 per tonne for East Malaysian planters (because the export tax kicks-in, in addition to the sales tax) and RM2,800 per tonne for Peninsular Malaysia because of the additionality in windfall profit tax.

Overall, the numbers basically reveal that this industry pays RM1.7 billion in sales tax, in cess, in windfall, and RM3.8 billion in terms of effective income tax.

“All in all, the industry of ours is nurturing this country, is providing the coffers of government, of RM5.5 billion and that was based on January to December last year,

“If the CPO price go up further, then we will have more taxation rate. So basically, it’s an important industry, it contributes to the government coffer.

“It’s a shared destiny that we have as growers and the government, to nurture this industry, that there is a win-win. You over tax us, then we become less competitive, overtax us, then it’s going to be a different ballgame,” he said.